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Basel Accord, post-consolidation growth in bank capital, cash reserves, deposit liability and volatility in bank credit in Nigeria

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  • Barine Michael Nwidobie

Abstract

The introduction of the Basel I Accord the world over has affected capital base of banks with spiral effects on bank cash reserves, demand deposits and bank credit of DMBs. GARCH results using post-consolidation data (implemented to meet Basel I requirements) of these variables shows high negative volatility in BDP, BCAP, CRS and BCRDT indicating that identified variables experienced high volatility during the post-consolidation period. The Pearson and Kendall's tau_b correlation coefficients results show that growth in banks' capital in Nigeria during the period improved bank liquidity but not post-consolidation bank credit; volatility in cash reserve ratio and cash reserve values did not affect growth of bank credit; aggressive deposit drive by the banks improved available loan able funds, impacting on bank credit; necessitating the implementation of Basel II, II.5 and III and initiation of composite monetary policies to improve soundness in DMBs in Nigeria.

Suggested Citation

  • Barine Michael Nwidobie, 2014. "Basel Accord, post-consolidation growth in bank capital, cash reserves, deposit liability and volatility in bank credit in Nigeria," African Journal of Economic and Sustainable Development, Inderscience Enterprises Ltd, vol. 3(4), pages 330-345.
    • Handle: RePEc:ids:ajesde:v:3:y:2014:i:4:p:330-345
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