Capital Adequacy Requirement, The Cost of Financial Intermediation and Risk Taking Behavior of The Indonesia Banking Sector
- DOI
- 10.2991/icbmr-18.2019.17How to use a DOI?
- Keywords
- capital requirement, the cost of financial intermediation, risk-taking
- Abstract
Basel I, II and III are strictly applied after the financial crisis in 1997 / 1998 and 2008 to ensure financial stability, among others by applying the minimum capital adequacy requirements that must be met by the bank in accordance with the risk profile. However, whether the impact of these requirements contributes positively to the Indonesian banking sector is still questionable, because some previous empirical studies have shown that strict capital requirements can force banks to increase their financial intermediation costs due to the rising capital cost. This study examines the relationship between minimum capital adequacy, the cost of financial intermediation and the risk-taking behavior of the Indonesia banking sector by using panel data from 45 commercial banks from 2012 to 2017. Using the Generalized Least Square (GLS) panel data regression, we find that the bank's capital ratio has a negative and significant relationship to the financial intermediation costs and risk-taking behavior of the Indonesia banking sector. We also find that the average return on equity of the Indonesia banking sector decreased during the observation period which shows that an increase in capital regulation position did not increase the cost of the banks’ equity capital.
- Copyright
- © 2019, the Authors. Published by Atlantis Press.
- Open Access
- This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).
Cite this article
TY - CONF AU - Rika Angelia Sirait AU - Rofikoh Rokhim PY - 2019/03 DA - 2019/03 TI - Capital Adequacy Requirement, The Cost of Financial Intermediation and Risk Taking Behavior of The Indonesia Banking Sector BT - Proceedings of the 12th International Conference on Business and Management Research (ICBMR 2018) PB - Atlantis Press SP - 99 EP - 104 SN - 2352-5428 UR - https://doi.org/10.2991/icbmr-18.2019.17 DO - 10.2991/icbmr-18.2019.17 ID - Sirait2019/03 ER -