Banks' Adjustment to Basel Ⅲ Reform: A Bank-Level Perspective for Emerging Europe

摘要

The strategies of commercial banks are identified in response to higher capital requirements imposed by the Basel III reform. The focus will be on a sample of nine EU emerging market countries where the behavior of the five largest banks in each country will be examined. It was found that all banking sectors raised capital adequacy ratios by about 6.5 pp on average, mainly through retained earnings. Worries raised at the early stage of discussions about Basel III that commercial banks would shrink their balance sheet by reducing their lending to meet stricter capital requirements materialized only in banks struggling with profitability.