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Comparative empirical analysis on the effect of mortgage loan on capital adequacy ratio

Author

Listed:
  • Dinc, Yusuf
Abstract
Capital adequacy ratio is the main indicator for banks to proceed with their operations. Standards for the calculation of the ratio are based on Basel Accord. Key factor for the calculation is credit risk. Credit risk is a function of credit and collateral type. In this case, mortgage has lower risk weight based on its collateral structure on credit risk. This research evaluates the effects of mortgages on capital adequacy ratio to understand the effects of collateral based credits. The findings show positive results between capital adequacy ratio and mortgages of participation banks. However, mortgages have negative impact on capital adequacy ratio of conventional banks. Participation and conventional banks of Turkey are compared on linear regression to analyse the effects of mortgages on capital adequacy ratio. Results are important for further research and professionals.

Suggested Citation

  • Dinc, Yusuf, 2017. "Comparative empirical analysis on the effect of mortgage loan on capital adequacy ratio," MPRA Paper 86451, University Library of Munich, Germany, revised 25 May 2017.
    • Handle: RePEc:pra:mprapa:86451
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    References listed on IDEAS

    as
    1. Yuliya Demyanyk & Otto Van Hemert, 2011. "Understanding the Subprime Mortgage Crisis," The Review of Financial Studies, Society for Financial Studies, vol. 24(6), pages 1848-1880.
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    4. William B. Francis & Matthew Osborne, 2010. "On the Behavior and Determinants of Risk‐Based Capital Ratios: Revisiting the Evidence from UK Banking Institutions," International Review of Finance, International Review of Finance Ltd., vol. 10(4), pages 485-518, December.
    5. Jérôme Vandenbussche & Ursula Vogel & Enrica Detragiache, 2015. "Macroprudential Policies and Housing Prices: A New Database and Empirical Evidence for Central, Eastern, and Southeastern Europe," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(S1), pages 343-377, March.
    6. Basten, Christhoph & Koch, Cathérine, 2015. "Higher Bank Capital Requirements and Mortgage Pricing: Evidence from the Countercyclical Capital Buffer (CCB)," HIT-REFINED Working Paper Series 26, Institute of Economic Research, Hitotsubashi University.
    7. Rubi Ahmad & M. Ariff & Michael Skully, 2008. "The Determinants of Bank Capital Ratios in a Developing Economy," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 15(3), pages 255-272, December.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Capital adequacy ratio Mortgage Islamic banking Retail credit;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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