| Title : | Impact of capital regulation on bank risk taking behavior: a case of Nepalese commercial banks | | Material Type: | printed text | | Authors: | Dinika Karmacharya, Author | | Publication Date: | 2018 | | Pagination: | 94p. | | Size: | GRP/Thesis | | Accompanying material: | 11/B | | Languages : | English | | Descriptors: | Bank capital
| | Class number: | 332.1 | | Abstract: | The banking industry is one of the most regulated industries. 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. Capital regulation, in particular, play a major role in supervision of the banking industries and mandates that banks should hold minimum amounts of capital which serve as a cushion against unexpected losses or adverse shocks that could lead to bank failure.
This study attempts to observe the impact of capital regulations on the risk of Nepalese commercial banks. This study is based on secondary data of 16 commercial banks of Nepal for the time period of 2008/09 to 2015/16, leading to a total of 128 observations. Data and information have been collected from the Banking and Financial Statistics, Bank Supervision Report published by Nepal Rastra Bank and annual reports of the selected commercial banks. This study has employed descriptive research design and casual comparative research design as it deals with the relationship between bank regulations and competition with the performance of Nepalese commercial banks.
The result reveals that average loan loss provision is highest for NBBL (Rs. 1.42 billion) and lowest for SANBL (Rs. 0.13 billion). The average non-performing loan is highest for HBL (Rs. 0.95 billion) and lowest for SANBL (Rs. 0.01 billion). The average capital adequacy ratio is highest for SABL (16.94 percent) and lowest for the NCC (10.04 percent). The average cash reserve ratio is highest for NMBBL (17.59 percent) and lowest for NIBL (9.82 percent). NIBL has the highest average deposit (Rs. 58.16 billion) and lowest for SANBL (Rs. 13.41 billion). GDP is highest in the year 2013/14 (6 percent) and lowest in 2015/16 (0.77 percent). Inflation is highest in the year 2009/10 (12.6 percent) and lowest in 2008/09 (6.7 percent). NIBL has the highest average firm size (Rs. 78.49 billion) and lowest for NCCBL (Rs. 22.33 billion). SANBL has the highest average liquidity (88.01 percent) and lowest for SCBL (50.85 percent).
The descriptive statistics for selected commercial bank shows that the loan loss provision is 0.59 billion rupees, average non-performing loan is 0.38 billion rupees, average capital adequacy ratio is 6.95 percent, average gross domestic product is 30.57 percent, average inflation rate is 3.89 percent, average deposit is 41.99 billion rupees, average firm size is 74.95 billion rupees and average Liquidity ratio is 9.13 percent.
The correlation matrix shows that capital adequacy ratio, firm size, inflation and liquidity ratio are negatively correlated with loan loss provision. However, gross domestic product and deposit have positive relationship with loan loss provision. However, capital adequacy ratio, firm size, inflation and liquidity ratio has negative relationship with non-performing loan. Likewise, deposit and gross domestic product have positive relationship with non- performing loan.
The regression reveals that deposit and firm size has positive and significant impact on loan loss provision. It indicates that higher the deposit and firm size, higher would be the loan loss provision. However, capital adequacy ratio, gross domestic product, inflation and liquidity ratio has negative impact loan loss provision. It indicates that higher the capital adequacy ratio, gross domestic product, inflation and liquidity ratio, lower would be the loan loss provision. The study also reveals deposit and firm size have positive and significant impact on non performing loan. It indicates that higher the deposit and firm size, higher would be the non performing loan. However, capital adequacy ratio, gross domestic product, inflation and liquidity ratio has negative impact non performing loan. It indicates that higher the capital adequacy ratio, gross domestic product, inflation and liquidity ratio, lower would be the loan loss provision.
The study also reveals gross domestic product has positive relationship with loan loss provision and non-performing loan. It indicates that higher the GDP growth, higher would be the loan loss provision and non-performing loan. However, the study reveals that there is negative relationship of capital adequacy ratio, firm size and liquidity ratio with loan loss provision and non-performing loan. It indicates that increase in capital adequacy ratio, firm size and liquidity ratio leads to increase in loan loss provision and non-performing loan. The result also shows that inflation is negatively related to the loan loss provision and non-performing loan. It indicates that increase in inflation leads to increase in loan loss provision and non-performing loan. The results also show that deposit and firm size have positive and capital adequacy ratio, gross domestic product, inflation and liquidity ratio have negative impact on loan loss provision and non-performing loan.
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Impact of capital regulation on bank risk taking behavior: a case of Nepalese commercial banks [printed text] / Dinika Karmacharya, Author . - 2018 . - 94p. ; GRP/Thesis + 11/B. Languages : English | Descriptors: | Bank capital
| | Class number: | 332.1 | | Abstract: | The banking industry is one of the most regulated industries. 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. Capital regulation, in particular, play a major role in supervision of the banking industries and mandates that banks should hold minimum amounts of capital which serve as a cushion against unexpected losses or adverse shocks that could lead to bank failure.
This study attempts to observe the impact of capital regulations on the risk of Nepalese commercial banks. This study is based on secondary data of 16 commercial banks of Nepal for the time period of 2008/09 to 2015/16, leading to a total of 128 observations. Data and information have been collected from the Banking and Financial Statistics, Bank Supervision Report published by Nepal Rastra Bank and annual reports of the selected commercial banks. This study has employed descriptive research design and casual comparative research design as it deals with the relationship between bank regulations and competition with the performance of Nepalese commercial banks.
The result reveals that average loan loss provision is highest for NBBL (Rs. 1.42 billion) and lowest for SANBL (Rs. 0.13 billion). The average non-performing loan is highest for HBL (Rs. 0.95 billion) and lowest for SANBL (Rs. 0.01 billion). The average capital adequacy ratio is highest for SABL (16.94 percent) and lowest for the NCC (10.04 percent). The average cash reserve ratio is highest for NMBBL (17.59 percent) and lowest for NIBL (9.82 percent). NIBL has the highest average deposit (Rs. 58.16 billion) and lowest for SANBL (Rs. 13.41 billion). GDP is highest in the year 2013/14 (6 percent) and lowest in 2015/16 (0.77 percent). Inflation is highest in the year 2009/10 (12.6 percent) and lowest in 2008/09 (6.7 percent). NIBL has the highest average firm size (Rs. 78.49 billion) and lowest for NCCBL (Rs. 22.33 billion). SANBL has the highest average liquidity (88.01 percent) and lowest for SCBL (50.85 percent).
The descriptive statistics for selected commercial bank shows that the loan loss provision is 0.59 billion rupees, average non-performing loan is 0.38 billion rupees, average capital adequacy ratio is 6.95 percent, average gross domestic product is 30.57 percent, average inflation rate is 3.89 percent, average deposit is 41.99 billion rupees, average firm size is 74.95 billion rupees and average Liquidity ratio is 9.13 percent.
The correlation matrix shows that capital adequacy ratio, firm size, inflation and liquidity ratio are negatively correlated with loan loss provision. However, gross domestic product and deposit have positive relationship with loan loss provision. However, capital adequacy ratio, firm size, inflation and liquidity ratio has negative relationship with non-performing loan. Likewise, deposit and gross domestic product have positive relationship with non- performing loan.
The regression reveals that deposit and firm size has positive and significant impact on loan loss provision. It indicates that higher the deposit and firm size, higher would be the loan loss provision. However, capital adequacy ratio, gross domestic product, inflation and liquidity ratio has negative impact loan loss provision. It indicates that higher the capital adequacy ratio, gross domestic product, inflation and liquidity ratio, lower would be the loan loss provision. The study also reveals deposit and firm size have positive and significant impact on non performing loan. It indicates that higher the deposit and firm size, higher would be the non performing loan. However, capital adequacy ratio, gross domestic product, inflation and liquidity ratio has negative impact non performing loan. It indicates that higher the capital adequacy ratio, gross domestic product, inflation and liquidity ratio, lower would be the loan loss provision.
The study also reveals gross domestic product has positive relationship with loan loss provision and non-performing loan. It indicates that higher the GDP growth, higher would be the loan loss provision and non-performing loan. However, the study reveals that there is negative relationship of capital adequacy ratio, firm size and liquidity ratio with loan loss provision and non-performing loan. It indicates that increase in capital adequacy ratio, firm size and liquidity ratio leads to increase in loan loss provision and non-performing loan. The result also shows that inflation is negatively related to the loan loss provision and non-performing loan. It indicates that increase in inflation leads to increase in loan loss provision and non-performing loan. The results also show that deposit and firm size have positive and capital adequacy ratio, gross domestic product, inflation and liquidity ratio have negative impact on loan loss provision and non-performing loan.
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