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Bank Capital Buffers and Bank Risks: Evidence from the Namibian Banking Sector

Author

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  • Johannes P S Sheefeni

    (Department of Economics, University of the Western Cape, South Africa)

Abstract

Purpose: This paper analysed the effects of bank’s risk on capital buffer in Namibia, in the absence of the consensus on the cyclical behavior of capital buffers. Design/methodology/approach: The study employed the autoregressive distributed lag (ARDL) modelling technique on quarterly data for the period 2001 to 2019. Findings: The study found the following: First, there is a long run relationship between the dependent variable and the independent variables. Second, the study showed that the ratio of NPLs to gross total loans negatively affect capital buffers in the short run, while it positively affects capital buffers in the long run. Furthermore, return on assets and liquidity negatively affects capital buffers in both the short and long run. On the contrary, bank size in form of log of total loans positively affects capital buffers in both the short and long run. Research limitations/implications: The unavailability of data of a long-term span is not desirable. Moreover, the limited data of certain variables narrowed the choice of a variety of variables that could be included in the study. Originality/value: The paper contributes to the hypothesized theory of countercyclical. The policy implication from these findings is that the presence of countercyclical relationship is in support of the transition from Basel II to Basel III to mitigate the procyclical as experienced under Basel II accords as documented in the literature. Future studies should focus on using a variety of variables to assess this relationship and see whether or not the outcome will be different.

Suggested Citation

  • Johannes P S Sheefeni, 2022. "Bank Capital Buffers and Bank Risks: Evidence from the Namibian Banking Sector," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 15(3), pages 60-68, December.
    • Handle: RePEc:tei:journl:v:15:y:2022:i:3:p:60-68
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    References listed on IDEAS

    as
    1. Berger, Allen N. & Bouwman, Christa H.S., 2013. "How does capital affect bank performance during financial crises?," Journal of Financial Economics, Elsevier, vol. 109(1), pages 146-176.
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    5. Ana Clara Bueno Teixeira Feitosa Noronha & Daniel Oliveira Cajueiro & Benjamin Miranda Tabak, 2011. "Bank Capital Buffers, Lending Growth Andeconomic Cycle: Empirical Evidence For Brazil," Anais do XXXVIII Encontro Nacional de Economia [Proceedings of the 38th Brazilian Economics Meeting] 035, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
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    7. repec:hal:gemptp:hal-04123251 is not listed on IDEAS
    8. Guidara, Alaa & Lai, Van Son & Soumaré, Issouf & Tchana, Fulbert Tchana, 2013. "Banks’ capital buffer, risk and performance in the Canadian banking system: Impact of business cycles and regulatory changes," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3373-3387.
    9. Umara Noreen & Fizza Alamdar & Tabassum Tariq, 2016. "Capital Buffers and Bank Risk: Empirical Study of Adjustment of Pakistani Banks," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1798-1806.
    10. Samina RIAZ & Venus Khim-Sen LIEW & Rossazana Bt Ab RAHIM, 2019. "The Impact of Business Cycle on Pakistani Banks Capital Buffer and Portfolio Risk," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 57-71, March.
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    More about this item

    Keywords

    Bank; Capital Buffers; Bank Risk; Namibia; ARDL; Procyclical; Countercyclical;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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