| Title : | Determinations of bank profitability and basel capital regulation: a comparative study of Nepalese joint venture, private domestic and public sector banks | | Material Type: | printed text | | Authors: | Bandana Khadka, Author | | Publication Date: | 2017 | | Pagination: | 109p. | | Size: | GRP/Thesis | | Accompanying material: | 8/B | | Languages : | English | | Descriptors: | Banks and banking
| | Class number: | 332.105 | | Abstract: | The capital requirement is a bank regulation, which sets a framework on how banks and depository institutions must handle their capital (Buyuksalvarci and Abdioglu, 2011). The key aspect of capital regulation is the calculation of minimum regulatory capital.Among various regulatory measures, the regulation of bank capital is crucial due to the important role it plays in banks’ soundness and risk taking behavior, and its influence on the profitability of banks (Madura 1993).The increased number of bank failures over this past year has raised concerns about the riskiness of banks and, hence, prompted movements for tighter capital requirements. Prudential regulation often imposes regulatory capital requirements in order to create the necessary cushion to protect banks against unexpected losses and ultimately failure (Dewatripont and Tirole, 1994;Goodhart et al., 2003; Pennacchi, 2005).
The major objective of this study is to examine the impact of capital regulation on profitability of Nepalese commercial bank.The study is based on the secondary data of 20 Nepalese commercial banks for the period of 2007/08 -2014/15 with a total of 160 observations. Data has been extracted from the annual reports of commercial banks and bank supervision report.This study has employed descriptive research design and causal comparative research design to deal with issues associated with the impact of capital regulation on profitability of Nepalese commercial banks.
The result shows that average return on assets is highest forNBB and ADBL has the highest average net interest margin. Similarly,the percentage of credit risk is highest for NBB (10.19 percent), bank size is largest for RBBL(Rs67.79 billion), the quality of loan is better for NBBL(13.97 percent). Cost to income ratio is highest for ADBL (302.76 percent), tier 1 capital is highest for NMB(16.06 percent), and average total capital ratio is highest for NMB bank (17.21 percent).
The descriptive analysis for joint venture banks shows that mean ROA, NIM,credit risk and bank size, cost to income ratio, assets quality, tier 1 capital and total capital ratio is 2.56 percent, 3.63 percent, 3.07 percent, Rs24.46 billion ,179.86 percent, 3.55 percent, 9.27 percent and 11.06 percent respectively. Similarly, the descriptive statistics for theprivate domestic bank shows that mean ROA, NIM,credit risk, bank size, cost to income ratio, assets quality, tier 1 capital and total capital ratio is 1.38 percent, 3.03 percent,1.81 percent, Rs23.87 billion, 235.50 percent, 1.81 percent,11.02 percent and 12.58 percentrespectively. Finally, the descriptive analysis for public bank shows that mean ROA, NIM,credit risk, bank size, cost to income ratio, assets quality, tier 1 capital and total capital ratio2.29 percent, 3.98 percent, 8.10 percent, Rs25.04 billion, 3.46 percent and -1.83 percent respectively.
The study ofjoint venture banks shows that, credit risk, assets quality, gross domestic product and inflation are positively correlated to return on assets and net interest margin whereas, the cost to income ratio, bank size, tier 1 capital ratio and total capital ratio are negatively correlated to return on assets and net interest margin. Similarly, the study of theprivate bank shows that, credit risk, bank size, assets quality, gross domestic product and inflation are positively correlated to return on assets but inflation is negatively correlated with net interest margin whereas, the cost to income ratio, tier 1 capital ratio and total capital ratio are negatively correlated to return on assets and net interest margin. Likewise, the study ofpublic bank shows that assets quality, 1 capital ratio, total capital ratio and gross domestic product are positively correlated to return on assets and net interest margin whereas, the credit risk, bank size, cost to income ratio and inflation are negatively correlated to return on assets and net interest margin.
The regression results show that credit risk has a positive impact on return on assets and net interest margin of joint venture and private banks of Nepal. However, the credit risk has a negative impact on thereturn on assets and net interest margin of public sector banks.Likewise, the result shows that tier 1 capital ratio and total capital ratio has negative impact on profitability of joint venture and private banks of Nepal. Whereas, tier 1 capital ratio and total capital ratio has a positive impact on profitability of public banks which indicates higher the tier 1 capital ratio and total capital ratio higher would be the profitability. Similarly, reveals that the assets quality has a positive impact on profitability of selected Nepalese commercial banks indicating that improved assets quality would enhance the profitability. Similarly, the cost to income ratio is negatively related with profitability of selected Nepalese commercial banks which indicates that higher the cost to income ratio lower would be the profitability of banks.
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Determinations of bank profitability and basel capital regulation: a comparative study of Nepalese joint venture, private domestic and public sector banks [printed text] / Bandana Khadka, Author . - 2017 . - 109p. ; GRP/Thesis + 8/B. Languages : English | Descriptors: | Banks and banking
| | Class number: | 332.105 | | Abstract: | The capital requirement is a bank regulation, which sets a framework on how banks and depository institutions must handle their capital (Buyuksalvarci and Abdioglu, 2011). The key aspect of capital regulation is the calculation of minimum regulatory capital.Among various regulatory measures, the regulation of bank capital is crucial due to the important role it plays in banks’ soundness and risk taking behavior, and its influence on the profitability of banks (Madura 1993).The increased number of bank failures over this past year has raised concerns about the riskiness of banks and, hence, prompted movements for tighter capital requirements. Prudential regulation often imposes regulatory capital requirements in order to create the necessary cushion to protect banks against unexpected losses and ultimately failure (Dewatripont and Tirole, 1994;Goodhart et al., 2003; Pennacchi, 2005).
The major objective of this study is to examine the impact of capital regulation on profitability of Nepalese commercial bank.The study is based on the secondary data of 20 Nepalese commercial banks for the period of 2007/08 -2014/15 with a total of 160 observations. Data has been extracted from the annual reports of commercial banks and bank supervision report.This study has employed descriptive research design and causal comparative research design to deal with issues associated with the impact of capital regulation on profitability of Nepalese commercial banks.
The result shows that average return on assets is highest forNBB and ADBL has the highest average net interest margin. Similarly,the percentage of credit risk is highest for NBB (10.19 percent), bank size is largest for RBBL(Rs67.79 billion), the quality of loan is better for NBBL(13.97 percent). Cost to income ratio is highest for ADBL (302.76 percent), tier 1 capital is highest for NMB(16.06 percent), and average total capital ratio is highest for NMB bank (17.21 percent).
The descriptive analysis for joint venture banks shows that mean ROA, NIM,credit risk and bank size, cost to income ratio, assets quality, tier 1 capital and total capital ratio is 2.56 percent, 3.63 percent, 3.07 percent, Rs24.46 billion ,179.86 percent, 3.55 percent, 9.27 percent and 11.06 percent respectively. Similarly, the descriptive statistics for theprivate domestic bank shows that mean ROA, NIM,credit risk, bank size, cost to income ratio, assets quality, tier 1 capital and total capital ratio is 1.38 percent, 3.03 percent,1.81 percent, Rs23.87 billion, 235.50 percent, 1.81 percent,11.02 percent and 12.58 percentrespectively. Finally, the descriptive analysis for public bank shows that mean ROA, NIM,credit risk, bank size, cost to income ratio, assets quality, tier 1 capital and total capital ratio2.29 percent, 3.98 percent, 8.10 percent, Rs25.04 billion, 3.46 percent and -1.83 percent respectively.
The study ofjoint venture banks shows that, credit risk, assets quality, gross domestic product and inflation are positively correlated to return on assets and net interest margin whereas, the cost to income ratio, bank size, tier 1 capital ratio and total capital ratio are negatively correlated to return on assets and net interest margin. Similarly, the study of theprivate bank shows that, credit risk, bank size, assets quality, gross domestic product and inflation are positively correlated to return on assets but inflation is negatively correlated with net interest margin whereas, the cost to income ratio, tier 1 capital ratio and total capital ratio are negatively correlated to return on assets and net interest margin. Likewise, the study ofpublic bank shows that assets quality, 1 capital ratio, total capital ratio and gross domestic product are positively correlated to return on assets and net interest margin whereas, the credit risk, bank size, cost to income ratio and inflation are negatively correlated to return on assets and net interest margin.
The regression results show that credit risk has a positive impact on return on assets and net interest margin of joint venture and private banks of Nepal. However, the credit risk has a negative impact on thereturn on assets and net interest margin of public sector banks.Likewise, the result shows that tier 1 capital ratio and total capital ratio has negative impact on profitability of joint venture and private banks of Nepal. Whereas, tier 1 capital ratio and total capital ratio has a positive impact on profitability of public banks which indicates higher the tier 1 capital ratio and total capital ratio higher would be the profitability. Similarly, reveals that the assets quality has a positive impact on profitability of selected Nepalese commercial banks indicating that improved assets quality would enhance the profitability. Similarly, the cost to income ratio is negatively related with profitability of selected Nepalese commercial banks which indicates that higher the cost to income ratio lower would be the profitability of banks.
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