<abstract xmlns="http://www.w3.org/1999/xhtml"><p>This paper contributes to the literature by providing recent empirical evidence about the positioning of the capital adequacy ratios (Basel II capital adequacy ratio and leverage ratio as proposed by Basel III) of Turkish banks and the business cycle. As in many emerging countries, the Turkish real sector is highly dependent on the banking loans for financing, and consequently, the macroeconomic system is vulnerable to the supply of bank loans. The results reveal that the Basel II capital adequacy ratio of Turkish banks is procyclical at a statistical significance in normal and crisis times. The results of cyclicality tests of the leverage ratio are mixed: if nominal GDP growth is taken as a business cycle indicator, it is procyclical; however, the credit-to-GDP gap signals countercyclical leverage ratios in normal times. In crisis times, the leverage ratio of the Turkish banking system is determined to be countercyclical.</p></abstract>

This paper contributes to the literature by providing recent empirical evidence about the positioning of the capital adequacy ratios (Basel II capital adequacy ratio and leverage ratio as proposed by Basel III) of Turkish banks and the business cycle. As in many emerging countries, the Turkish real sector is highly dependent on the banking loans for financing, and consequently, the macroeconomic system is vulnerable to the supply of bank loans. The results reveal that the Basel II capital adequacy ratio of Turkish banks is procyclical at a statistical significance in normal and crisis times. The results of cyclicality tests of the leverage ratio are mixed: if nominal GDP growth is taken as a business cycle indicator, it is procyclical; however, the credit-to-GDP gap signals countercyclical leverage ratios in normal times. In crisis times, the leverage ratio of the Turkish banking system is determined to be countercyclical.

Are Capital Ratios Procyclical? Evidence from Turkish Banking Data

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

{"article-title":"Are Capital Ratios Procyclical? Evidence from Turkish Banking Data"}

This paper contributes to the literature by providing recent empirical evidence about the positioning of the capital adequacy ratios (Basel II capital adequacy...

Are Capital Ratios Procyclical? Evidence from Turkish Banking Data

Published Online: Sep 10, 2018

Page range: 159 - 180

Received: Jul 15, 2017

Accepted: Oct 06, 2017

DOI: https://doi.org/10.2478/jcbtp-2018-0028

Keywords
Capital, capital adequacy ratio, leverage rate

© 2018 Neslihan Topbaş Turguttopbas , published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Are Capital Ratios Procyclical? Evidence from Turkish Banking Data

Published Online: Sep 10, 2018

Page range: 159 - 180

Received: Jul 15, 2017

Accepted: Oct 06, 2017

DOI: https://doi.org/10.2478/jcbtp-2018-0028

KeywordsCapital, capital adequacy ratio, leverage rate

© 2018 Neslihan Topbaş Turguttopbas , published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
Capital, capital adequacy ratio, leverage rate