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Basel III in Nigeria: making it work

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  • Ozili, Peterson K

Abstract

Basel III is a framework to preserve the stability of the international banking system. Nigeria adopts Basel capital framework for capital regulation in the banking sector. This article is a policy discussion on how to make Basel III work in Nigeria. The significance of Basel III is discussed, and some ideas to consider when implementing Basel III to make it work in Nigeria, are provided. Under Basel III, the Nigerian banking system should expect better capital quality, higher levels of capital, the imposition of minimum liquidity requirement for banks, reduced systemic risk, and a transitional arrangement for transitioning across Basel I and II. This article also emphasizes that (i) there should be enough time for the transition to Basel III in Nigeria, (ii) a combination of micro- and macro- prudential regulations is needed; and (iii) the need to repair the balance sheets of banks, in preparation for Basel III. The study recommends that the Nigerian regulator should enforce strict market discipline and ensure effective supervision under the Basel framework. There should be international cooperation between the domestic bank regulator and bank regulators in other countries. The regulator should have a contingency plan to reassure the public of the safety of their deposits, and there should be emergency liquidity solutions to support the financial system in bad times.

Suggested Citation

  • Ozili, Peterson K, 2021. "Basel III in Nigeria: making it work," MPRA Paper 108495, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:108495
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    File URL: https://mpra.ub.uni-muenchen.de/108495/1/MPRA_paper_108495.pdf
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    References listed on IDEAS

    as
    1. Yan, Meilan & Hall, Maximilian J.B. & Turner, Paul, 2012. "A cost–benefit analysis of Basel III: Some evidence from the UK," International Review of Financial Analysis, Elsevier, vol. 25(C), pages 73-82.
    2. Peterson K. Ozili, 2019. "Basel III in Africa: making it work," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 10(4), pages 401-407, September.
    3. Mohammed Kalloub & Ayhan Kapusuzoglu & Nildag Basak Ceylan, 2018. "The Impact Of Basel Iii Adoption By G20 Members On Their Credit Ratings," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 6(1), pages 47-55.
    4. Laeven, Luc & Levine, Ross, 2009. "Bank governance, regulation and risk taking," Journal of Financial Economics, Elsevier, vol. 93(2), pages 259-275, August.
    5. Adesina, Kolade Sunday, 2019. "Basel III liquidity rules: The implications for bank lending growth in Africa," Economic Systems, Elsevier, vol. 43(2), pages 1-1.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Basel III; Bank Business Models; Bank Performance; Financial Stability; Capital Regulation; Bank Regulation; Nigeria;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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