The impact of Basel III implementation on the financial performance of the banking industry in Bangladesh
The implementation of Basel III regulations has become a crucial factor influencing the financial performance of the banking sector in Bangladesh. The primary objective of this study is to examine the impact of Basel III implementation on the financial performance of the banking industry in Banglade...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2025-02-01
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| Series: | Banks and Bank Systems |
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| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/21669/BBS_2025_01_Yamin.pdf |
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| author | Nafis Yamin Mostafa Asif Md. Abu Hasnat Mohammed Monzurul Islam Muhammad Nasiruddin Hissan Khandakar Md. Azizur Rahman |
| author_facet | Nafis Yamin Mostafa Asif Md. Abu Hasnat Mohammed Monzurul Islam Muhammad Nasiruddin Hissan Khandakar Md. Azizur Rahman |
| author_sort | Nafis Yamin |
| collection | DOAJ |
| description | The implementation of Basel III regulations has become a crucial factor influencing the financial performance of the banking sector in Bangladesh. The primary objective of this study is to examine the impact of Basel III implementation on the financial performance of the banking industry in Bangladesh. The research utilizes secondary data from 20 commercial banks in Bangladesh, including state-owned, private, and Islamic banks. It offers a diverse and representative sample of Bangladesh’s banking sector, covering the period from 2014 to 2023. This variety ensures a comprehensive understanding of different banking models and their challenges, representing the scenario of the whole industry. A multivariate regression model with fixed effects, determined by the Hausman test, was employed to analyze the relationship between capital adequacy (CRAR, Core Capital Tier-1, Tier-1, and Tier-2 Capital Ratios) and bank-specific factors (size, provisions) on performance indicators (ROA and NPL). The findings reveal that higher capital adequacy, particularly the Tier-1 Capital Ratio, and CRAR, positively influences bank profitability (measured by ROA) and reduces NPLs. Conversely, larger bank size correlates with lower ROA and higher NPLs, and increased provisions also lead to higher NPLs. These results underscore the significance of Basel III in enhancing the financial performance and stability of the banking sector in Bangladesh, suggesting that more substantial capital buffers can improve profitability and reduce risks associated with non-performing loans. |
| format | Article |
| id | doaj-art-b6ab18ef0bb2419b9a9b27972cf7d3d2 |
| institution | DOAJ |
| issn | 1816-7403 1991-7074 |
| language | English |
| publishDate | 2025-02-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Banks and Bank Systems |
| spelling | doaj-art-b6ab18ef0bb2419b9a9b27972cf7d3d22025-08-20T02:50:47ZengLLC "CPC "Business Perspectives"Banks and Bank Systems1816-74031991-70742025-02-012019810810.21511/bbs.20(1).2025.0921669The impact of Basel III implementation on the financial performance of the banking industry in BangladeshNafis Yamin0https://orcid.org/0009-0002-0146-6315Mostafa Asif1https://orcid.org/0009-0006-7403-6438Md. Abu Hasnat2https://orcid.org/0000-0002-4721-5303Mohammed Monzurul Islam3https://orcid.org/0009-0006-5255-5982Muhammad Nasiruddin4https://orcid.org/0009-0009-1304-3628Hissan Khandakar5https://orcid.org/0009-0005-5743-7312Md. Azizur Rahman6https://orcid.org/0000-0002-5672-4230MBM, Bangladesh Institute of Bank Management, BangladeshMBA, Lecturer, Department of Business Administration, University of Scholars, BangladeshPh.D., Assistant Professor, Department of Business Administration, University of Scholars, BangladeshMBA, Department of Finance, University of Dhaka, BangladeshMBA, Senior Lecturer, Department of Accounting and Finance, North South University, BangladeshResearch Assistant, Department of Business Administration, University of Scholars, BangladeshPh.D., Associate Professor, Department of Business Administration, Daffodil International University, BangladeshThe implementation of Basel III regulations has become a crucial factor influencing the financial performance of the banking sector in Bangladesh. The primary objective of this study is to examine the impact of Basel III implementation on the financial performance of the banking industry in Bangladesh. The research utilizes secondary data from 20 commercial banks in Bangladesh, including state-owned, private, and Islamic banks. It offers a diverse and representative sample of Bangladesh’s banking sector, covering the period from 2014 to 2023. This variety ensures a comprehensive understanding of different banking models and their challenges, representing the scenario of the whole industry. A multivariate regression model with fixed effects, determined by the Hausman test, was employed to analyze the relationship between capital adequacy (CRAR, Core Capital Tier-1, Tier-1, and Tier-2 Capital Ratios) and bank-specific factors (size, provisions) on performance indicators (ROA and NPL). The findings reveal that higher capital adequacy, particularly the Tier-1 Capital Ratio, and CRAR, positively influences bank profitability (measured by ROA) and reduces NPLs. Conversely, larger bank size correlates with lower ROA and higher NPLs, and increased provisions also lead to higher NPLs. These results underscore the significance of Basel III in enhancing the financial performance and stability of the banking sector in Bangladesh, suggesting that more substantial capital buffers can improve profitability and reduce risks associated with non-performing loans.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/21669/BBS_2025_01_Yamin.pdfBangladeshbanking sectorBasel IIIcapital adequacycredit risk managementfinancial performance |
| spellingShingle | Nafis Yamin Mostafa Asif Md. Abu Hasnat Mohammed Monzurul Islam Muhammad Nasiruddin Hissan Khandakar Md. Azizur Rahman The impact of Basel III implementation on the financial performance of the banking industry in Bangladesh Banks and Bank Systems Bangladesh banking sector Basel III capital adequacy credit risk management financial performance |
| title | The impact of Basel III implementation on the financial performance of the banking industry in Bangladesh |
| title_full | The impact of Basel III implementation on the financial performance of the banking industry in Bangladesh |
| title_fullStr | The impact of Basel III implementation on the financial performance of the banking industry in Bangladesh |
| title_full_unstemmed | The impact of Basel III implementation on the financial performance of the banking industry in Bangladesh |
| title_short | The impact of Basel III implementation on the financial performance of the banking industry in Bangladesh |
| title_sort | impact of basel iii implementation on the financial performance of the banking industry in bangladesh |
| topic | Bangladesh banking sector Basel III capital adequacy credit risk management financial performance |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/21669/BBS_2025_01_Yamin.pdf |
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