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Why Banks Need Adequate Capital Adequacy Ratio? A Study of Lending & Deposit Behaviors of Banking Sector of Pakistan

Author

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  • Narmeen, Sakina
  • Saba, Irum
  • Kouser, Rehana
  • Khurram, Haris

Abstract

This study focuses on the impact of Capital Adequacy Ratio on bank’s lending and deposit behavior and also on the importance of maintaining certain level of capital reserve. CAR is examined using two different ratios leverage ratio and risk-based capital ratio. This study is beneficial for the banking industry in determining enough CAR and to make decision for taking deposits and issuing loans. The sample of the study includes 25 banks of Pakistan; 20 conventional and 5 Islamic banks and the study period is of 10 years. Panel data methodology is used. Data is collected from secondary sources. Findings show that CAR has impact on change in capital and change in loans.

Suggested Citation

  • Narmeen, Sakina & Saba, Irum & Kouser, Rehana & Khurram, Haris, 2018. "Why Banks Need Adequate Capital Adequacy Ratio? A Study of Lending & Deposit Behaviors of Banking Sector of Pakistan," Journal of Accounting and Finance in Emerging Economies, CSRC Publishing, Center for Sustainability Research and Consultancy Pakistan, vol. 4(1), pages 1-16, June.
    • Handle: RePEc:src:jafeec:v:4:y:2018:i:1:p:1-16
    DOI: http://doi.org/10.26710/jafee.v4i1.343
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    Cited by:

    1. Xiaoqiong Diao, 2020. "Do the Capital Requirements Affect the Effectiveness of Monetary Policy from the Credit Channel?," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(5), pages 1-6.
    2. Jian-Hang Wang & Yu-Hsien Wu & Phil Yihsing Yang & Hsiang-Yi Hsu, 2023. "Sustainable Innovation and Firm Performance Driven by FinTech Policies: Moderating Effect of Capital Adequacy Ratio," Sustainability, MDPI, vol. 15(11), pages 1-15, May.

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