Inderscience Publishers

Basel Accord, post–consolidation growth in bank capital, cash reserves, deposit liability and volatility in bank credit in Nigeria

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The introduction of the Basel I Accord the world over has affected capital base of banks with spiral effects on bank cash reserves, demand deposits and bank credit of DMBs. GARCH results using post–consolidation data (implemented to meet Basel I requirements) of these variables shows high negative volatility in BDP, BCAP, CRS and BCRDT indicating that identified variables experienced high volatility during the post–consolidation period. The Pearson and Kendall's tau_b correlation coefficients results show that growth in banks' capital in Nigeria during the period improved bank liquidity but not post–consolidation bank credit; volatility in cash reserve ratio and cash reserve values did not affect growth of bank credit; aggressive deposit drive by the banks improved available loan able funds, impacting on bank credit; necessitating the implementation of Basel II, II.5 and III and initiation of composite monetary policies to improve soundness in DMBs in Nigeria.

Keywords: Basel Accord, bank capital, cash reserves, bank credit, demand deposits, bank recapitalisation, banking industry, post–consolidation growth, deposit liability, volatility, Nigeria

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