Title: Basel Accord, post-consolidation growth in bank capital, cash reserves, deposit liability and volatility in bank credit in Nigeria

Authors: Barine Michael Nwidobie

Addresses: Department of Accounting and Finance, Caleb University, P.M.B. 21238, Ikeja, Lagos, Nigeria

Abstract: The introduction of the Basel I Accord the world over has affected capital base of banks with spiral effects on bank cash reserves, demand deposits and bank credit of DMBs. GARCH results using post-consolidation data (implemented to meet Basel I requirements) of these variables shows high negative volatility in BDP, BCAP, CRS and BCRDT indicating that identified variables experienced high volatility during the post-consolidation period. The Pearson and Kendall's tau_b correlation coefficients results show that growth in banks' capital in Nigeria during the period improved bank liquidity but not post-consolidation bank credit; volatility in cash reserve ratio and cash reserve values did not affect growth of bank credit; aggressive deposit drive by the banks improved available loan able funds, impacting on bank credit; necessitating the implementation of Basel II, II.5 and III and initiation of composite monetary policies to improve soundness in DMBs in Nigeria.

Keywords: Basel Accord; bank capital; cash reserves; bank credit; demand deposits; bank recapitalisation; banking industry; post-consolidation growth; deposit liability; volatility; Nigeria.

DOI: 10.1504/AJESD.2014.065579

African Journal of Economic and Sustainable Development, 2014 Vol.3 No.4, pp.330 - 345

Published online: 08 Nov 2014 *

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