How far has Basel III regulation affected the key banking sector variables in Bangladesh?

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Sheikh, MH, 2022. How far has Basel III regulation affected the key banking sector variables in Bangladesh? PhD, Nottingham Trent University.

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Abstract

This study started by examining the correlation between liquidity risk and bank capital, which are the key regulatory changes of Basel III. Then it examined the effect of liquidity risk and bank capital on bank return, cost efficiency, and the growth of banks and Non-Bank Financial Institutions (NBFIs) in Bangladesh. The cost efficiency of banks and the effect of liquidity risk and bank capital on cost efficiency have been investigated following a two-step approach. The cost efficiency has been estimated using the Stochastic Frontier Analysis (SFA), and the effect has been estimated by applying the Generalised Method of Moments (GMM) with Instrumental Variables (IV). The correlation between the liquidity risk and bank capital and their effect on bank return has also been examined using IV GMM. The growth of banks and the differential impact on NBFIs' growth have been investigated by applying the pooled Ordinary Least Square (OLS) and Random Effect (RE) models following the difference-in-difference treatment effect. A balanced panel data of banks and NBFIs from 2011 to 2019 has been applied in this study, whereas the country has been following Basel III since 2015. This study has applied four different measures of liquidity risk, and they have been found homogeneous. The results show that banks with higher capital ratios hold less liquidity, indicating a higher liquidity risk. The year fixed effect results show no significant change in banks' liquidity position, but the bank return and cost efficiency decreased after implementing Basel III in the country. The liquidity risk is found homogeneous to bank return and cost efficiency, but it is not related to the growth of banks and NBFIs. On the other hand, bank capital is positively related to bank return and negatively related to the cost efficiency and growth of banks and NBFIs in the country. The difference-in-difference treatment effect illustrates that NBFIs' growth in lending share from 2015 to 2019 is significantly lower than banks.

Item Type:	Thesis
Creators:	Sheikh, M.H.
Date:	September 2022
Rights:	The copyright in this work is held by the author. You may copy up to 5% of this work for private study, or personal, non-commercial research. Any re-use of the information contained within this document should be fully referenced, quoting the author, title, university, degree level and pagination. Queries or requests for any other use, or if a more substantial copy is required, should be directed to the author.
Divisions:	Schools > Nottingham Business School
Record created by:	Linda Sullivan
Date Added:	25 Jul 2023 08:35
Last Modified:	25 Jul 2023 08:35
URI:	https://irep.ntu.ac.uk/id/eprint/49435