<abstract xmlns="http://www.w3.org/1999/xhtml"><p>In December 2010, the Basel Committee on Baking Supervision introduced the liquidity coverage ratio (LCR) standard for banking institutions in response to disturbances that rocked banks during the 2007/08 global financial crisis. The rule is aimed at enhancing banks’ resilience to short term liquidity shocks as it requires banks to hold ample stock of high grade securities. This study attempts to evaluate the impact of the LCR specification on the funding structures of banks in emerging markets by answering the question “Did Basel III LCR requirement induced banks in emerging market economies to increase deposit funding more than they would otherwise do?” The study found that the LCR charge has been effective in persuading banks in emerging markets to garner more stable retail deposits. This response may engender banking sector stability if competition for retail deposits is properly regulated.</p></abstract>

In December 2010, the Basel Committee on Baking Supervision introduced the liquidity coverage ratio (LCR) standard for banking institutions in response to disturbances that rocked banks during the 2007/08 global financial crisis. The rule is aimed at enhancing banks’ resilience to short term liquidity shocks as it requires banks to hold ample stock of high grade securities. This study attempts to evaluate the impact of the LCR specification on the funding structures of banks in emerging markets by answering the question “Did Basel III LCR requirement induced banks in emerging market economies to increase deposit funding more than they would otherwise do?” The study found that the LCR charge has been effective in persuading banks in emerging markets to garner more stable retail deposits. This response may engender banking sector stability if competition for retail deposits is properly regulated.

Basel III LCR Requirement and Banks’ Deposit Funding: Empirical Evidence from Emerging Markets

Journal of Central Banking Theory and Practice

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

In December 2010, the Basel Committee on Baking Supervision introduced the liquidity coverage ratio (LCR) standard for banking institutions in response to...

Basel III LCR Requirement and Banks’ Deposit Funding: Empirical Evidence from Emerging Markets

Published Online: May 22, 2019

Page range: 101 - 128

Received: Feb 03, 2018

Accepted: Jun 12, 2018

DOI: https://doi.org/10.2478/jcbtp-2019-0016

Keywords
Basel III, LCR, commercial banks, emerging market economies

© 2019 Tafirei Mashamba et al., published by Sciendo

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

Basel III LCR Requirement and Banks’ Deposit Funding: Empirical Evidence from Emerging Markets

Published Online: May 22, 2019

Page range: 101 - 128

Received: Feb 03, 2018

Accepted: Jun 12, 2018

DOI: https://doi.org/10.2478/jcbtp-2019-0016

KeywordsBasel III, LCR, commercial banks, emerging market economies

© 2019 Tafirei Mashamba et al., published by Sciendo

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

Keywords
Basel III, LCR, commercial banks, emerging market economies