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Impact of regulatory capital on European banks financial performance: A review of post global financial crisis

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  • Oino, Isaiah

Abstract

The importance of having sufficient regulatory capital has undeniably attracted immense attention since the 2008 financial crisis. The notion is that increased capital requirement negatively impact the financial performance of the banks. Using structural equation modelling, the article employs 4503 European banks data from 2001 to 2005 examining the interaction of tier 1 capital and financial performance. The results indicate that the banks have grown post the 2008 financial crisis. Likewise, the tier 1 has increased but the increase is not in line with the expansion. As expected there is a negative association between tier 1 capital and financial performance. The results also indicate that the banks have diversified their revenue streams compared with pre-2008. In terms of efficiency, the results indicate that the cost income ratio post 2008 is higher than pre-financial crisis. The results implies that the regulators must take account of the expansion of banks and the increase in their capital levels.

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  • Oino, Isaiah, 2018. "Impact of regulatory capital on European banks financial performance: A review of post global financial crisis," Research in International Business and Finance, Elsevier, vol. 44(C), pages 309-318.
    • Handle: RePEc:eee:riibaf:v:44:y:2018:i:c:p:309-318
    DOI: 10.1016/j.ribaf.2017.07.099
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    3. CUREA-PITORAC Ruxandra Ioana, 2020. "An Inquiry On Top Banks By Tier 1 Ranking From Central And Eastern Europe," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 64-73, December.
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    6. Philippe Oster, 2020. "Contingent Convertible bond literature review: making everything and nothing possible?," Journal of Banking Regulation, Palgrave Macmillan, vol. 21(4), pages 343-381, December.
    7. Ghulam Mujtaba Kayani & Yasmeen Akhtar & Chen Yiguo & Tahir Yousaf & Syed Jawad Hussain Shahzad, 2021. "The Role of Regulatory Capital and Ownership Structure in Bank Liquidity Creation: Evidence From Emerging Asian Economies," SAGE Open, , vol. 11(2), pages 21582440211, April.
    8. David Blanco‐Alcántara & Jorge Gallud‐Cano & Félix J. López‐Iturriaga & Óscar López‐de‐Foronda, 2022. "Have European banks maintained their payout policy during the crisis? The role of scrip dividends," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4619-4632, October.

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