Original scientific paper

BASEL III: RETHINKING LIQUIDITY AND LEVERAGE

Isepy Tamas

Abstract

In my study I focus on important topics of the new
banking regulation Basel III: leverage and liquidity.
Using linear regression I analysed banks’ long term
liquidity and leverage ratios and profitability in 12
emerging market, new member, countries and in 15
developed, old member, countries of the EU between
2008 and 2010. I point out that in EU12 there is
negative relationship between profit and interbank
market dependence in 2010, while positive correlation
between profit and funding base stability ratio.
In the case of EU15 there is a negative correlation between
solvency and profitability in 2008, while the relationship
is positive between capital quality – more
Tier 1 capital – and profitability.
Furthermore, I have tested the Myers-Majluf theory
with monthly aggregated equity issue and the Dow
Jones financial institutions index changes relating to
the eurozone between 1990 and 2011. According to
this theory, equity issue leads to lower equity prices.
I point out that on an aggregated level (eurozone)
the theory cannot be proved. Myers-Majluf theory
is particularly important in the process of banking
recapitalisation, since it is this theory that dictates
slower banking capitalisation. From the perspective
of a macroprudential policy capital increase would be
more beneficial than asset decrease.

Keywords

Basel III; liquidity; leverage

Hrčak ID:

133141

URI

https://hrcak.srce.hr/133141

Publication date:

1.12.2013.

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