Bank sensitivity to international regulatory reform: The case of Korea

Doojin Ryu, Robert I. Webb, Jinyoung Yu*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)


This study examines the reaction of Korean banks’ procyclical behaviour to the adoption of the Basel III accord, which imposes a global capital framework on banks, and the sensitivity of Korean banks’ reactions depending on their capital structures prior to the adoption of the accord. Employing the random-effects panel data approach, we find that the procyclicality of banks, in terms of the capital adequacy ratio, profitability, and insolvency risk, is mitigated after the adoption of the accord. This change is only evident for banks with low capital adequacy ratios before the regulatory reform. Our findings suggest that the Basel III accord effectively mitigates bank procyclicality and that banks’ sensitivity to the reform becomes greater when their capital adequacy ratios are lower. The policy implications of the adoption in emerging and transitional economies are discussed, given the heterogeneous reaction of Korean banks to the international regulatory reform.

Original languageEnglish
Pages (from-to)149-162
Number of pages14
JournalInvestment Analysts Journal
Issue number2
Publication statusPublished - 2 Apr 2020
Externally publishedYes


  • Bank sensitivity
  • Basel III accord
  • Korean market
  • capital adequacy ratio
  • international regulatory reform


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