Search

This study investigated the stock market reaction and the effect of the implementation of Basel II and Basel III on the stock returns of South African banks. In achieving this aim, this study focused on daily and annual data of six commercial banks from 3rd January 2004 to 31st December 2022. The event study methodology was employed to identify abnormal returns around the specified event dates. The effect of the changes in Basel capital requirements on stock returns was not uniform across the four events. The market reacted favourably to the implementation of the Basel II requirements in the country. There was a significantly negative market reaction to the subsequent full implementation of Basel III official. Finally, higher Basel capital requirements (CAR) was associated with lower bank stock returns. The findings implied that bank regulators increase capital to strengthen the banking system but constrain the maximisation of shareholders’ values.

Focusing on a panel sample of 41 commercial banks over the period of 2000-2018, this study examined the effect of capital adequacy on the resilience of commercial banks in Africa under changing Basel levels (II, III, and the proposed Basel IV). The study created sample representative banks for the proposed Basel IV and used two measures, namely Z-score and CAMELS, to capture bank resilience. Using the panel logistic regression and fixed effect model, we found that capital adequacy, liquidity, earnings management efficiency, and macroeconomic conditions are key determinants of the resilience of commercial banks in Africa. Additionally, Basel compliant banks tend to be less prone to macroeconomic factors. Based on the positive and significant impact of all Basel capital ratios on Zscore, the results suggest that a high level of capital requirements increases African banks' resilience, and banks with higher capital can absorb risk exposures.

Bank lending is a major source of income for a bank. Compliance with higher Basel capital requirements (CAR) portends serious implication for distribution of loan portfolio across different sectors. The objective of the study is to examine African banks’ responses to higher CAR in terms of portfolio shift. The study used descriptive statistics and ANOVA for panel data of African commercial banks that have implemented Basel II or III CAR for the period 2000 and 2018. Based on the results of our analysis, implementation of higher Basel CAR by African banks revealed four key findings. Firstly, our results suggest that higher Basel CAR particularly Basel III reduced total loans for South African banks. Secondly, African banks engage in portfolio shift with higher Basel levels. Thirdly, higher Basel capital increased banks' capital ratios in Africa, but some banks are still characterized by low equity. Fourthly, African banks reduce lending to high risk-weighted loans such as real estate and commercial loans except for South African banks which increased lending to commercial loans with higher Basel CAR. Lastly, this study proffers key insight into the lending behaviour of African banks with the implementation of higher Basel CAR.