Jordanian Banks Compliance with Basel II & The Effect on Banks’ Capital and Risk Managing – Dr. Khalid Al-Zoubi & Mr. Murad Atier
Abstract
Meeting the requirements of Basel II will mean different things to different Banks and the process of becoming compliant will be dependent on many aspects. The complexity of the rules, their changing detail and the uncertain implementation date make meeting the requirements of Basle II a challenge.
Moreover, in recent years, CBJ have increased their focus on the capital adequacy of banking institutions to enhance the stability of the financial system. The purpose of the present paper is to shed some light on whether and how Jordanian Bank react to constraints placed by the regulator on their capital. We used a simultaneous equations model to analyze adjustments in capital and risk at Jordanian banks. Our results indicate that regulatory pressure induce banks to increase their capital, but does not affect the level of risk.