Capital Adequacy under Basel 3

315 Pages·2015·2.1 MB·English

Capital Adequacy under Basel 3
Its Implications for Large Commercial Banks in
Ghana and Kenya

Josiah Gershon De-Graft Quansah

Submitted in accordance
with the requirements for the degree of PhD

The University of Leeds
Faculty of Law, Centre for Business Law and Practice
September 2014
The candidate confirms that the work submitted is his own and that
appropriate credit has been given where reference has been made to the
work of others.
This copy has been supplied on the understanding that it is copyright material
and that no quotation from the thesis may be published without proper
acknowledgement.
© 2014 ‘The University of Leeds’ and Josiah Gershon De-Graft Quansah.
Acknowledgements
To my loving parents, Mr Robert Ivan Quansah (Snr) and Mrs Milburga
Chenard Quansah (nee Amuah) both of whom are retired legal practitioners –
I salute you both and say a big THANK YOU.
During the 12 months of my LLM in International Banking and Finance Law
(2009), you were both there for me physically, spiritually (in prayers) and
materially including financially. You have both replicated this unwavering
support for me during the three years of my PhD.
During this period, I never felt alone even though you were thousands of miles
away in Ghana. Your words of assurance, reassurance, enthusiasm and
boundless financial support kept me going physically, emotionally and
mentally.
Words cannot describe how grateful I am to you both for this immense
support which was genuine, freely given and above all came from the heart. I
will forever be indebted to you both for the confidence and belief you have
always had in my commitment and enthusiasm for the law. It is my most
fervent hope and indeed my prayer that you both keep going on from strength
to strength, in good health and longevity to enable you reap fully the seeds of
knowledge you sowed in me many years ago.
Special thanks goes to Professor Andrew Campbell, who I dare say saw the
potential in me to do a PhD. Having been my supervisor on my LLM
programme in 2009, Andy has always been a source of inspiration. I
remember very clearly at our leaving graduation reception when you said to
me ‘...so what are your plans Josiah? Have you considered a PhD?’.
Although my response at the time was ‘no way, Prof’ his question sparked a
few months of soul searching within myself during which I increasingly
became convinced that a PhD was the pathway for me.
Professor Campbell, you are the main reason why I chose to study my PhD
here at Leeds University and may you continue to inspire others like you have
inspired me.
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I also wish to say a special thank you to Judith Dahlgreen. I give you total
credit for giving me the confidence to overcome pre-conference jitters and
nerves by describing my first presentation as that delivered by a ‘natural’.
That gave me the confidence boost I needed to deliver other presentations.
Judith, I am ever so grateful for the massive input you have provided
alongside Andy for the duration of my PhD.
To both of you, I say a big thank you for guiding me to produce this intellectual
piece of work. I am indeed grateful for your support, suggestions, constructive
criticisms and above all your feedback comments.
Finally, I wish to acknowledge the Ghana Education Trust Fund for providing
sponsorship for this intellectual piece of work. I am eternally grateful.
God bless you all!

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Abbreviations
ADB - Asian Development Bank
AfDB - African Development Bank Group
AIRB - Advanced Internal Ratings Based
AMA - Advanced Measurement Approach
ASEA - African Securities Exchange Association
ATM - Automated Teller Machines
BCBS - Basel Committee on Banking Supervision
BESA - Bond Exchange of South Africa
BIA - Basic Indicator Approach
BIS - Bank for International Settlements
BoG - Bank of Ghana
CAD - Capital Adequacy Directive
CAMELS - Capital Adequacy, Asset Quality,
Management Soundness, Earnings,
Liquidity and Sensitivity
CAR - Capital Adequacy Ratio
CBK - Central Bank of Kenya
CBN - Central Bank of Nigeria
¢ or Gh¢ - Cedis or Ghana cedis
CCF - Credit Conversion Factor
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CCR - Counterparty Credit Risk
CDB - Carribean Development Bank
CEDB - Council of Europe Development Bank
CET 1 - Common Equity Tier 1
CIB - Chartered Institute of Bankers
CRA - Credit Rating Agency
CVA - Credit Valuation Adjustment
DPFB - Deposit Protection Fund Board
D-SIBs - Domestic Systemic Important Banks
DTA - Deferred Tax Asset
DTL - Deferred Tax Liability
EAC - East African Community
EAD - Exposure at default
EBRD - European Bank for Reconstruction and
Development
ECA - Export Credit Agency
ECAIs - External Credit Assessment Institutions
EDTF - Enhanced Disclosure Task Force
EIB - European Investment Bank
EL - Economic loss
ERS - Economic Recovery Strategy
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ES - Expected Shortfall
EU - European Union
FCA - Financial Conduct Authority
FDI - Foreign Direct Investment
FDIC - Federal Deposit Insurance Corporation
FEP - Financial Education Partnership
FINSAP - Financial Sector Adjustment Programme
FINSSP - Financial Sector Strategic Plan
FIRB - Foundation Internal Ratings Based
FSA - Financial Services Authority
FSAP - Financial Sector Assessment Programme
FSB - Financial Stability Board
FSI - Financial Soundness Indicator
G10 - Group of 10 Industrialised Countries
G20 - Group of 20 Industrialised Countries
GAAP - Generally Accepted Accounting Principles
GDP - Gross Domestic Product
GDR(s) - Global Depositary Receipt(s)
GSE - Ghana Stock Exchange
GT - Ghana Telecom
GTB - Guaranty Trust Bank
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IADB - Inter-American Development Bank
IBRD - International Bank for Reconstruction and
Development
IFC - International Finance Corporation
IFRS - International Financial Reporting Standard
IMA - Internal Measurement Approach
IMF - International Monetary Fund
IOSCO - International Organisation of Securities
Commission
IRB - Internal Ratings Based
IRC - Incremental Risk Charge
JSE - Johannesburg Stock Exchange
Ksh - Kenyan schilling
LCFI - Large and Conglomerate Financial
Institution
LCR - Liquidity Coverage Ratio
LDA - Loss Distribution Approach
LGD - Loss Given Default
LMA - Loan Market Association
LSE - London Stock Exchange
M - Maturity
MPC - Monetary Policy Committee
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MPR - Monetary Policy Rate
MSR - Mortgage Servicing Right
N - Naira
NIB - Nordic Investment Bank
NIBOR - Nigerian Inter-bank offer rate
NISE - Nigeria Stock Exchange
NNPC - Nigerian National Petroleum Company
NPL - Non-performing loan
NPP - New Patriotic Party (A Ghanaian political
party)
NSE - Nairobi Stock Exchange
NSFR - Net Stable Funding Ratio
ODI - Overseas Development Institute
OECD - Organisation for Economic Co-operation
and Development
OTC - Over-the-counter
PD - Probability of Default
PRA - Prudential Regulatory Authority
RBI - Reserve Bank of India
ROA - Return on Asset
ROE - Return on Equity
RWA - Risk Weighted Asset
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SAR - South African Rand
SARB - South African Reserve Bank
SBA - Scenario – Based Approach
SCA - Scorecard Approach
SIFI - Systemically Important Financial Institution
SIV - Structured Investment Vehicle
SPV - Special Purpose Vehicle
SSA - Sub-Saharan Africa
SSNIT - Social Security National & Investment Trust
STA - Standardised Approach
U.K. - United Kingdom
UNCTAD - United Nations Conference on Trade and
Development
U.S.A. - United States of America
USD - United States dollars
VaR - Value-at-Risk
WAMZ - West African Monetary Zone
WTO - World Trade Organisation
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