Impact of Basel Iii Regulations on Banks: Evidence from Afriland First Bank in Cameroon

Tan Zhonming ,Ernest Kay Bakpa ,Ding Guoping ,Ginette Yanassong Nkili

doi:10.7176/rjfa/10-13-05

Abstract

Bank financing is an engine of economic growth, mainly where financial intermediation is more advanced. The public authorities are therefore faced with the obligation to advocate for the resilience of the financial system. As part of their assignments, supervisors are working to put in place prudential regulation that would require banks to have a solid financial base to face the various risks and perils. Although the financial crisis has confirmed the need for adjustments in prudential regulation, the financial institutions have denounced the high cost of the new Basel requirements, a cost that would inevitably weigh on the banking activity and, consequently, on the economic activity. Based on this observation, we are conducting an impact study whose objective would is to evaluate and demonstrate the impact of the implementation of the Basel III agreements in Cameroon. Keywords: Banking; Basel III regulations; solid financial base; financial institutions; DOI : 10.7176/RJFA/10-13-05 Publication date :July 31 st 2019

Highlights

Introduction Banking regulations vary between jurisdictionsThe banking system in Cameroon is regulated by laws and regulations whose sources are: International Conventions, Customs Laws, Ordinances, Presidential Decrees, Ministerial Orders, Circulars and Court Decisions
In order to strengthen and ensure a sound financial system, the Basel Committee on Banking Supervision (BCBS) established in 2010, under the Basel III agreements, two liquidity standards, namely: the liquidity ratio short-term and long-term (LCR) and long-term structural liquidity ratio (NSFR)These ratios have come into effect gradually since 2015 and must be fully applied in 2018 for the structural liquidity ratio and in 2019 for the short-term liquidity ratio
The first two agreements are mainly part of a micro-prudential framework: Basel I is best known for the Cooke ratio, even though the recommendations of the Basel Committee on Banking www.iiste.org

Summary

Introduction

Introduction Banking regulations vary between jurisdictionsThe banking system in Cameroon is regulated by laws and regulations whose sources are: International Conventions, Customs Laws, Ordinances, Presidential Decrees, Ministerial Orders, Circulars and Court Decisions. The Basel Committee was established in 1974 under the supervision of the G10 countries with the desire of the central banks of the countries that compose it, to improve the stability of the international banking system, the dissemination and promotion of best banking practices and of the international cooperation in prudential supervision(Demirgüç-Kunt & Detragiache, 2011) As such, it issues recommendations on banking best practices and proposes minimum standards. Tier 2 which is the supplementary capital is just made of all other capital (Jablecki, 2009) Despite this first step towards stricter regulation of banking activities, Basel I covered only credit risk and did not propose any market and operational risk measures. In response to these shortcomings, the Basel Committee published in 2004 a new Basel II regulatory framework

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