CAPITAL RATIOS OF US BANKS

V. Sivarama Krishnan
University of Central Oklahoma
Abdulhamid Sukar
Cameron University, Lawton, Oklahoma
ABSTRACT
The financial crisis of 2008-2009 highlights the problems with Basel II accord and the
need for better capital standards. Basel III accord addresses these problems and strengthens
bank regulations, supervision, and risk management. The United States is currently implementing
Basel III in phases. This study provides critical overview of Basil accord and attempts an
empirical analysis of bank ratios of US banks. Panel models were also used to estimate the
determinants of bank capital. Profitability measure does not appear to have significant
relationship with bank capital. The effect of liquidity measures on bank capital is mixed, with
Loss Allowance to Loans and Loss Allowance to Non-Current Loans having significant negative
effect. The most significant determinant of bank capital is bank size, with smaller size banks
holding more capital relative to their risk adjusted assets.