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The Influence of Capital Requirement of Basel III Adoption on Banks’ Operating Efficiency: Evidence from U.S. Banks

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Listed:
  • Gabriel A. Ogunmola

    (Sharda University, Andijan, Uzbekistan)

  • Fengsheng Chien

    (Fuzhou University of International Studies and Trade, Fuzhou, China)

  • Ka Yin Chau

    (City university of Macau, Macau, China)

  • Li Li

    (City university of Macau, Macau, China)

Abstract

The United States is recognized as the largest economic entity in the world and its financial system has developed steadily through the guidance of the Federal Reserve System for over one hundred years. However, in recent years, the global economic downturn, coupled with the global COVID-19 pandemic, has led to an unprecedented economic depression and rapid decline in the United States financial sector. Although the U.S. government has gradually instructed banks to raise the core quantity but a giant crisis under the economic depression is still present. This study thus takes U.S. commercial banks as the subject of research and employs the two-stage bootstrapped truncated regression to investigate the impacts of increases in required Core, Tier 1, and total capital adequacy ratios on their efficiency.

Suggested Citation

  • Gabriel A. Ogunmola & Fengsheng Chien & Ka Yin Chau & Li Li, 2022. "The Influence of Capital Requirement of Basel III Adoption on Banks’ Operating Efficiency: Evidence from U.S. Banks," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 11(2), pages 5-26.
    • Handle: RePEc:cbk:journl:v:11:y:2022:i:2:p:5-26
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    More about this item

    Keywords

    Banking; Capital requirement; Operating efficiency; Two-stage DEA; Bootstrap.;
    All these keywords.

    JEL classification:

    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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