Received: 2019-08-19  |  Accepted: 2020-01-12  |  Published: 2020-03-30

Title

How regulation of bank capital adequacy and liquidity affects pricing of bonds of the banks


Abstract

The article discusses the evolution of regulation of banks in Kazakhstan before and after financial crisis of 2007-2008. The purpose of the article is to examine how introduction of Basel III standards on capital adequacy and liquidity affected pricing of bonds of Kazakh banks. In general, post crisis reforms in the banking system, mainly Basel III standards, enhanced capital adequacy and liquidity of the banks. Banks now tend to hold more capital and high-quality liquid assets compared to pre-crisis period. Our analysis showed that banks with better liquidity conditions would receive cheaper funding via bonds compared to other banks. We found that bond prices reacted explicitly to the changes in liquidity requirements, rather than capital measures. New capital adequacy measures seem to be less constraining for banks with government support. In contrast, changes in capital measures made substantial impact on bond spreads of banks without government support, these banks actively increased their capital in post crisis period.


Keywords

capital adequacy, liquidity, crisis, risks, pricing


JEL classifications

G10 , G12


URI

http://jssidoi.org/jesi/article/484


DOI


Pages

1708-1722


Funding


This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License

Authors

Tatibekova, Aida
Turan University, Almaty, Kazakhstan https://turan-edu.kz
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Bubeyev, Mukhtar
Turan University, Almaty, Kazakhstan https://turan-edu.kz
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Journal title

Entrepreneurship and Sustainability Issues

Volume

7


Number

3


Issue date

March 2020


Issue DOI


ISSN

ISSN 2345-0282 (online)


Publisher

VšĮ Entrepreneurship and Sustainability Center, Vilnius, Lithuania

Cited

Google Scholar

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References