Does Basel Compliance Matter for Bank Performance?

Abstract

The global financial crisis underscored the importance of regulation and supervision to a well-functioning banking system that efficiently channels financial resources into investment. In this paper, IRCCF Director Rym Ayadi, members of the IRCCF scientific board Sami Ben Naceur and Barbara Casu contributed to the ongoing policy debate by assessing whether compliance with international regulatory standards and protocols enhance bank operating efficiency. The paper focuses specifically on the adoption of international capital standards and the Basel Core Principles for Effective Bank Supervision (BCP). The relationship between bank efficiency and regulatory compliance is investigated using the (Simar and Wilson 2007) double bootstrapping approach on an international sample of publicly listed banks. The results indicate that overall BCP compliance, or indeed compliance with any of its individual chapters, has no association with bank efficiency.

Keywords: Banks, Basel Core Principles, Bank compliance, Bank supervision, Bank regulations, BCP, Efficiency, Regulatory Compliance, bank performance, interest, banking, capital, operating efficiency, accounting, risk