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THE BASEL III LIQUIDITY REQUIREMENTS AND BANKS’ STOCK RETURNS: A quantitative study of the impact of the Basel III liquidity requirements on the banks’ stock returns.
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Business Administration.
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Business Administration.
2019 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

The 2008 financial crisis highlighted the critical need for more liquidity regulation in the financial sector, in particular among the banking industry. In November 2010, the Basel Committee on Banking Supervision introduced two new liquidity requirements,based on the liquidity coverage ratio (LCR) and on the net stable fund ratio (NSFR). In the European Union, the Basel III liquidity requirements became mandatory to fulfill for all banks in 2013. The implementation on those requirements has started in 2015 and is not yet finished. This research project will investigate the impact of the Basel III liquidity requirements on the banks’ stock returns. Our research question aims at establishing how the introduction of the Basel III liquidity requirements affects banks’ stock returns. The existing literature on the subject is very scarce, as the implementation of the liquidity requirements dates back from only 2015 and is still not complete. However, there are previous research works focusing on the impact of the liquidity requirements on profitability which we will use as the foundation of our project. To answer to our research question, we conducted a quantitative analysis on a sample comprising 28 banks from the European Union and from the European EconomicArea. These banks were selected from the 2018 EU-wide stress test results of the European Banking Authority. The quantitative study is using as main variables the Basel III liquidity requirements, the deposits-to-assets ratio and the return-on-assets ratio. The time frame of the research comprises the years between 2011 and 2018. The findings of our work establish a significant negative effect of the implementation of the Basel III liquidity requirements on the banks’ stock returns.

Place, publisher, year, edition, pages
2019.
National Category
Business Administration
Identifiers
URN: urn:nbn:se:umu:diva-161313OAI: oai:DiVA.org:umu-161313DiVA, id: diva2:1333774
Educational program
Master's Programme in Finance
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Available from: 2019-07-02 Created: 2019-07-01 Last updated: 2019-07-02Bibliographically approved

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CiteExportLink to record
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Citation style
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