IMPLEMENTATION OF THE BASEL III AND ITS EFFECT ON BAHRAIN’S BANKING SECTOR

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Abstract

The financial crisis which occurred in 2007 and 2008 has had a major impact on the global banking industry. As a result, many banks went bankrupt or the governments had bailed them out. Thus, to protect banks against such a situation, the Basel Committee on Banking Supervision (BCBS) had scrutinized and altered the banking regulations, termed as the Basel III. The purpose of this study is to analyse the Basel III paradigm and its impact on the banks’ financial health of Bahrain. This kind of study will enhance the understanding of Basel III and its impact on banking sector for researchers of GCC in general and Bahrain in particular. The approach of the study is qualitative, whereas the theoretical framework has been used in the literature review. The empirical results were acquired from the interviews of various personnel from banks in Bahrain to gauge their perspective on Basel III paradigm. The overall perspectives of the banking personnel about Basel III were that it should have more stringent requirements. In this case, the capital requirements are considered to be too low and the risk weights are too unrealistic. However, majority of the banking personnel are still optimistic that Basel III does grant superior protection, but it doesn’t provide complete protection against the chance of failure. According to the research findings, majority of respondents were optimistic and feel that it does help in protecting the banks, while others consider it completely useless and failed to prevent failures.

Keywords: Basel III, Risk Management, Banking Regulations, Financial Crisis, Basel Committee on Banking Supervision

Received: 28.03.2017

Accepted: 16.06.2017

How to cite this paper: Althawadi, M. A., & Kukreja, G. (2017). Implementation of the Basel III and its effect on Bahrain’s banking sector. Corporate Ownership & Control, 15(1-1), 224-234. https://doi.org/10.22495/cocv15i1c1p6