Impact of the Basel I Accord on Credit Expansion in Developing Countries

AIMS International Journal of Management, Vol. 5, No. 2, p. 101, May 2011

24 Pages Posted: 12 Feb 2012

See all articles by Mohammed Ershad Hussain

Mohammed Ershad Hussain

Dillard University

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Mahfuzul Haque

Indiana State University

Date Written: May 9, 2011

Abstract

In this paper, we have attempted to conduct a mean-test to determine if the Basel I Accord had any significant effect on bank activities. The mean-test indicates that it had significant impact on bank activities. We find that the Accord was successful in raising the capital ratios and equity of banks, paving the way for the financial soundness of commercial banks. Our findings also show limited evidence supporting the “risk-retrenchment” hypothesis. Given that our samples consist of both developed and developing countries, the study finds some evidence of “credit crunch” in developing countries also. Capital regulations resulted in a decline in bank lending.

Keywords: Basel I Accord, Credit Crunch, Capital Requirement, Capital Regulations, Bank Lending and Developing Countries

JEL Classification: E05, G02

Suggested Citation

Hussain, Mohammed Ershad and Hassan, M. Kabir and Haque, Mahfuzul, Impact of the Basel I Accord on Credit Expansion in Developing Countries (May 9, 2011). AIMS International Journal of Management, Vol. 5, No. 2, p. 101, May 2011, Available at SSRN: https://ssrn.com/abstract=2003444

Mohammed Ershad Hussain (Contact Author)

Dillard University ( email )

2601 Gentilly Blvd
New Orleans, LA 70122
United States
5043440568 (Phone)

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Mahfuzul Haque

Indiana State University ( email )

Terre Haute, IN 47809
United States

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