The global financial crisis prompted a period of widespread regulatory changes geared towards creating a safer financial system. The Basel III regulation emerged post-crisis and adjusted the minimum capital requirements for banks, attempting to ensure that they would be better equipped to absorb losses in the case of the next potential crisis. Advocates of this regulation believe that our financial system is far safer when these higher capital requirements are in place, and some advocates believe these requirements should be even higher. On the other hand, critics of this regulation argue that as a result of these requirements, banks profit less and their lending behaviors are impacted negatively. The research question of this thesis was formed as a response to these critics and asks: What effect do the Basel III capital requirements have on bank profitability and lending behavior. This thesis uses a regression analysis to determine whether these capital requirements have had an impact on the profitability and lending behaviors of global systemically important banks.
Author: Clare Gibbons, Class of 2019
Faculty Advisor: Alexander Arapoglou , UNC Kenan-Flagler Business School