A concurrent triangulation mixed methods study on Basel II/III capital modelling techniques implementation in Zimbabwean banks

Abstract

Purpose- While extending two extant studies, this paper pioneers a holistic test and critical examination of the usefulness of Basel II/III capital modeling implementation in sixteen Zimbabwean banks. Methodology- A mixed method approach was adopted where quantitative and qualitative research designs were concurrently combined under equal status. Quantitative data was collected with self-administered structured questionnaires distributed to 120 Risk Managers and manifest archival content analysis carried on 160 audited annual financial statements for 2011-2020. Qualitative data was collected with latent archival content analysis from purposive samples of 35 audited annual financial statements and 20 previous survey reports both for 2011-2020. Data analysis was carried out with descriptive statitistics and interpretative methods. Findings- This paper finds deep implementation of Basel II/III capital modeling methods, sufficient data and skills, violation of the proportionality principle, existence of information asymmetries and low levels of market discipline and supervision in Zimbabwean banks. The violation of proportionality principle is shown by the fact that local banks are implementing advanced capital modeling methods at the same pace or even higher than internationally active banks. The existence of information asymmetries is shown by divergence of perspectives between regulator and banks. While the regulator is enforcing proportionality, banks are adopting advanced methods for their internal purposes regardless of size. The usefulness of Basel II/III capital modeling in Zimbabwean banks as a tool for managing risk based minimum capital requirements is not clear given the violation of the proportionality principle by banks and existence of other parallel higher capital requirements enforced by the regulator. Conclusion-This paper makes two specific contributions to knowledge. First it adds empirical evidence to two previous studies thus contributing to literature on proportionality and Basel II/III capital modeling practices in Zimbabwean banks. Second, it proposes policy recommendations to improve capital management in Zimbabwean banks. Keywords: quantitative risk management, capital modeling, global capital regulation, concurrent triangulation, mixed methods, financial engineering. JEL Codes: G10, G20, F30