Impact of the Basel IV framework on securitization and performance of commercial banks in South Africa
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DOIhttp://dx.doi.org/10.21511/bbs.15(3).2020.09
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Article InfoVolume 15 2020, Issue #3, pp. 95-105
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Securitization has been used as a tool for bank funding, liquidity, risk management, and performance for over two decades. However, securitization activities were negatively affected by the recent financial crises, which led to stricter regulations of banks’ off-balance-sheet activities. This study examined the possible impacts of the Basel IV capital requirements on securitization activities and the performance of commercial banks in South Africa if implemented. The study used aggregated financial data of selected South African commercial banks to create a sample representative projection as if the selected banks had implemented the Basel IV capital requirements between 2002 and 2018. The simulated data were analyzed and compared to Basel III data using panel data analysis under certain assumptions, while other conditions held constant. The results revealed that the implementation of the Basel IV capital requirements will have a significant positive impact on securitization activities of commercial banks in South Africa. However, higher capital requirements of Basel IV may have no significant impact on performance of securitizing banks but it can protect banks from securitization exposure.
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JEL Classification (Paper profile tab)G18, G21, G28
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References46
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Tables5
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Figures0
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- Table 1. Definition of model variables
- Table 2. Summary statistics of key variables
- Table 3. Frequency of securitization per bank per year
- Table 4. Results of capital requirements and securitization (random effects)
- Table 5. Results of securitization and bank performance (fixed effect)
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