Taming financial capital : the role and limitation of Basel Capital Regulation in Pakistan

Abstract

The study investigates the role of International Basel Capital Regulation in taming the financial capital via improving risk management in banking. The study examines if capital adequacy ratios of commercial banks calculated under Basel Capital Accord reflect credit risk, market risk, operational risk, liquidity risk, and economic impact in Pakistan. The study employed dual methodology utilising both primary and secondary data. A Liker-scale questionnaire was administered in addition to deploying panel data approach. The results of the study show that Credit risk and operational risk along with the size of bank and bank profitability show significant impact on capital requirements of the commercial banks of Pakistan. Credit risk showing significant negative relationship with the capital adequacy ratio of the commercial banks of Pakistan.