IDEAS home Printed from https://ideas.repec.org/a/eme/jespps/jes-05-2017-0112.html
   My bibliography  Save this article

Linking bank regulatory capital buffer to business cycle fluctuations

Author

Listed:
  • Kolade Sunday Adesina
  • John Muteba Mwamba

Abstract

Purpose - The purpose of this paper is to assist bank regulators in Africa who are currently considering the implementation of Basel III countercyclical capital buffer (CCB) requirement. Design/methodology/approach - Using a panel data set of 129 commercial banks operating in 14 African countries over the period 2004–2014, this paper estimates the system generalized method of moments regression to examine the impact of business cycle on banks’ regulatory capital buffers and attempts to identify the influence of bank revenue diversification, market power and cost of funding (CF) on bank regulatory capital buffers. It further carries out some robustness analyses using a panel data set of 257 commercial banks in 23 African countries over the period 2004–2014. Findings - The results show that higher regulatory capital buffers are associated with higher market power, higher revenue diversification and higherCF. Additionally, the results show significant evidence of procyclical behavior of bank capital buffers (BUFs) in the sampled countries. Practical implications - The results of this study suggest that African banking systems are not exposed to contagion and systemic risks arising from countercyclical movements ofBUFs to the real economy. Therefore, this study does not support the implementation of the Basel III CCB requirement in the sampled African countries. Originality/value - Considering that the results of existing studies on the cyclical behavior ofBUFs are inconclusive, there is value in studying the cyclical movements of bank regulatory capital buffers in a set of countries that has not been analyzed before. Toward this direction, this is the first empirical study focusing on the cyclical behavior of bank regulatory capital buffers in Africa. Besides examining the cyclical behavior of bank regulatory capital buffers, this paper further investigates the effects of bank revenue diversification, market power andCFon bank regulatory capital buffers.

Suggested Citation

  • Kolade Sunday Adesina & John Muteba Mwamba, 2018. "Linking bank regulatory capital buffer to business cycle fluctuations," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 45(3), pages 565-585, August.
    • Handle: RePEc:eme:jespps:jes-05-2017-0112
    DOI: 10.1108/JES-05-2017-0112
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/JES-05-2017-0112/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/JES-05-2017-0112/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/JES-05-2017-0112?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Samina RIAZ & Venus Khim-Sen LIEW & Rossazana Bt Ab RAHIM, 2019. "The Impact of Business Cycle on Pakistani Banks Capital Buffer and Portfolio Risk," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 57-71, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jespps:jes-05-2017-0112. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.