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The Impact of Basel III Implementation on Bank Lending in South Africa

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  • Xolani Sibande
  • Alistair Milne

Abstract

This study investigates the impact of the Basel III capital requirement on the supply of bank credit in South Africa. The literature offers greatly varying estimates of the impact of bank capital requirements on loan supply. Using a specification closely modelled on a related study of Peru, we report panel regressions using monthly balance sheet data for the four biggest banks in South Africa. We distinguish between three different categories of bank lending for household and corporate borrowers and report complementary local projection estimates to capture dynamic impacts. We find little evidence that the introduction of higher capital requirements under Basel III has reduced the supply of bank credit in South Africa. We surmise that this is mainly due to the large banks being well capitalised and operating with capital buffers that are larger than regulatory minimum requirements.

Suggested Citation

  • Xolani Sibande & Alistair Milne, 2025. "The Impact of Basel III Implementation on Bank Lending in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 93(1), pages 6-26, March.
    • Handle: RePEc:bla:sajeco:v:93:y:2025:i:1:p:6-26
    DOI: 10.1111/saje.12398
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