Investigating the Simultaneous Implementation of the Regulatory Capital and Liquidity Requirements in Iranian Banks

The financial crisis of 2007-2009 led to the redoubled attention of international institutions to the issue of banking regulation. In this regard, the Basel Committee to exercise effective banking supervision reviewed and introduced new standards and requirements in the field of banking regulations, such as capital adequacy requirements, providing liquidity requirements, and leverage ratio. On the whole, studies show that capital ratios have significant and negative impacts on large European bank-retail-and-other-lending-growth in a context of deleveraging and “credit crunch” in Europe over the post-2008 financial crisis period. Additionally, liquidity indicators have positive but perverse effects on bank-lending growth, which supports the need to consider heterogeneous banks’ characteristics and behaviors when implementing new regulatory policies. In this article, by using the data of the Iranian banks during 2006-2018, the simultaneous effect of the new liquidity and capital regulations, inspired by the requirements of Basel Committee and based on the new instructions of the Central Bank, has been studied. In other words, the issue addressed in this paper is what conditions the simultaneous implementation of capital and liquidity requirements by banks will put them in. According to the results, liquidity requirements and capital requirements are complementary. Based on the results, the relationship between liquidity risk (Inverse of Net Stable Funding Ratio) and capital adequacy is positive. Therefore, with the increase of liquidity risk in banks, it will not be possible to establish capital requirements following the provisions of Basel III

The Effect of Bank Leverage on Profitability: Focus on Strengthening the Credit System in the Iranian Banking System

One of the key indicators in the banking sector is bank leverage. Bank leverage refers to how resources are used in the balance sheet to finance the assets. The quality of banking assets has a significant impact on lending in banks. The proper use of bank leverage can lead to getting appropriate profit and reducing many of the bank's problems when managing the risks. Besides the internal factors, the creation of bank leverage is also influenced by the economic factors in each country. During the recent financial crisis, much attention was paid to the balance sheet balance of the banks. How to use bank leverage is one of the most important and challenging issues every bank faces. Considering the role and importance of bank leverage as the most important channel for passing on economic blockages, bank's profitability influenced by this factor has a prominent role in investment decisions. Leverage allows a financial institution to increase its potential profits and decrease its losses on a specific financial position.     For data analysis, a panel regression model based on generalized method of moments has been used by employing data during the years 2006-2016. The results show a positive and significant linear relationship between the bank leverage and the profitability. The results also demonstrate that the higher bank leverage, the more profit banks can obtain. Moreover, more analysis to determine the relationship between liquidity variables, deposits, bank size, facility ratios and inflation has been expanded. Hence, by increasing the profitability of banks, it is possible to strengthen the credibility of banks, and by increasing the credit to the economy, effective steps can be taken on employment and production in the economy