Basel III New Liquidity Framework and Malaysian Commercial Banks Profitability

Rasidah Mohd Said

Abstract


ABSTRACT

In the light of the 2007-2008 global financial crisis, Basel Committee on Banking Supervision proposed the Net Stable Funding Ratio (NSFR), a new liquidity framework under Basel III. Its aim is to promote sustainable funding structures of the financial institutions. This current paper attempts to analyse NSFR impact on Malaysian commercial banks profitability. Using panel data of eight domestic Malaysian commercial banks for the period 2005-2011, the results suggest there is a convincing evidence that this new liquidity ratio is an important factor in affecting the sample banks’ profitability. The ability of banks in managing the stability of their funding sources as well as liquidity of its asset is an advantage to them and is translated into higher profitability. In addition, this study also confirms finding of previous studies that relates bank-specific determinants and profitability.

Keywords: Basel III; liquidity framework; net stable funding ratios; liquidity coverage ratio; profitability

ABSTRAK

Lanjutan daripada krisis kewangan global yang bermula pada tahun 2007-2008, Jawatankuasa Basel berkenaan Penyeliaan Bank telah mencadangkan sebuah kerangka kecairan di bawah Basel III yang dikenali sebagai Net Stable Funding Ratio (NSFR). Tujuannya ialah untuk memperkenalkan sebuah struktur pendanaan yang teguh kepada institusi kewangan. Kajian ini bertujuan menganalisis kesan NSFR ke atas keuntungan bank-bank perdagangan di Malaysia. Dengan menggunakan data panel dari lapan bank perdagangan tempatan di Malaysia untuk tempoh 2005-2011, keputusan analisa membuktikan bahawa nisbah kecairan baru ini merupakan faktor penting yang boleh mempengaruhi keuntungan bank-bank yang dikaji. Keupayaan bank-bank dalam menguruskan kestabilan sumber dana dan kecairan aset mereka memberikan kelebihan kepada bank untuk meningkatkan keuntungan bank. Selain itu, kajian ini juga menyokong keputusan kajian-kajian lepas yang menunjukkan hubungan antara faktor penentu bank dengan keuntungan bank.

Kata kunci: Basel III; kerangka kecairan; nisbah dana kestabilan bersih; nisbah perlindungan kecairan; keuntungan

 


Keywords


Basel III; Liquidity framework; Net Stable Funding Ratios; Liquidity Coverage Ratio; Profitability; Commercial Banks

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