Capital requirements and banks performance under Basel-III: A comparative analysis of Australian and British banks

© 2020 Board of Trustees the University Illinois This study examines whether capital requirements under Basel III are effective in enhancing profitability and efficiency banking sector. Drawing on a sample largest commercial banks from UK Australia over period 2000 to 2019, we employ FMOLS (Fully Modified OLS) DOLS (Dynamics estimation approaches. The results indicate that stricter ratio increases operating earnings, whist it fails improve bank efficiency. Our findings cast doubts effectiveness tax policy observed banks. Further empirical testing shows an optimal structure which can achieve best performance. Interestingly, these ratios broadly line with minimum common equity required Basel-III. macroeconomic outlook also contributes performance British Australian found perform well inflationary pressure higher rates, contrary whose deteriorates. hold across different samples, efficiency, measures various models.