It Takes Two to Tango. Capital Constraints and Bank Lending in Poland

RISK-BASED CAPITAL AND FINANCIAL STABILITY: EMPIRICAL EVIDENCE FROM KENYAN LISTED BANKS

Since the Global Financial Crisis, the stability of commercial banks has remained a central policy concern, intensifying in Kenya where mergers, acquisitions and restructuring have concentrated more than 75% of banking-sector market share among nine listed banks. The Central Bank of Kenya has simultaneously tightened Basel III-aligned risk-based capital requirements, yet whether such capital regulation, alongside the underlying risk composition of banks' balance sheets, translates into greater financial stability remains empirically unresolved for Kenya's listed banking segment. This study examines the effects of risk-based capital (RBC) on financial stability among Kenyan listed banks, controlling for the risk-weighted assets-to-total assets ratio, operational cost efficiency, and macroeconomic growth and anchored in the Buffer Theory of Capital. The study uses a balanced quarterly panel of eight Nairobi Securities Exchange-listed banks over 2013Q1–2025Q2. After introducing one-quarter lags, the estimation sample comprises 392 bank-quarter observations.  A Hausman test supports bank fixed effects, and cross-sectional and period heteroskedasticity are addressed through Panel EGLS with cross-section weights and panel-corrected standard errors (PCSE). The lagged dependent variable, financial stability, is positive and highly significant (ρ = 0.5248, p < 0.001), confirming strong persistence and path dependence in bank stability over time. Risk-based capital exerts a positive and significant effect on financial stability (β = 1.2912, p = 0.0004), and the risk-weighted-assets-to-total-assets ratio is also positively and significantly associated with stability (β = 0.2656, p = 0.0045). The cost-to-income ratio is negatively and significantly associated with stability (β = −0.2210, p = 0.0002), while GDP growth is negatively signed but statistically insignificant (β = −0.0172, p = 0.1344). The model explains 86.6% of the variation in financial stability (F = 204.37, p < 0.001), and the results are broadly robust to an alternative two-quarter lag structure. The findings confirm that adequate risk-based capitalisation is central to bank resilience in Kenya and that the composition of risk-weighted assets carries independent information for financial stability beyond capital adequacy alone. The study recommends that capital regulation remain the cornerstone of prudential policy in Kenya, that supervisors monitor the evolving risk-weighted composition of bank balance sheets, and that operational efficiency be strengthened alongside capital adequacy requirements. JEL: G21; G28; G32; G34; L11

An Assessment of Banking Sector Recapitalization and Performance of Deposit Banks in Nigeria

This article investigates the effect of recapitalization on the performance of deposit banks in Nigeria, particularly in the context of recent macroeconomic challenges and the Central Bank of Nigeria new proposed recapitalization policy slated for implementation beginning in 2025. Despite previous consolidation reforms in 2004–2005 that raised the minimum capital base to ₦25 billion and reduced the number of banks to 25, the sector continues to face issues related to inadequate capital buffers, weak intermediation, and exposure to systemic risks. The article employed an ex-post facto research design and panel least squares regression, analyzing secondary data from 2010 to 2023 across five leading Nigerian banks (such as Access Bank, Zenith Bank, First Bank, Stanbic IBTC, and Ecobank). Key performance indicators such as Return on Assets (ROA), Capital Adequacy Ratio (CAR), Liquidity Ratio, and Non-Performing Loan Ratio (NPLR) were used to assess bank performance, three hypotheses were tested. The findings revealed that recapitalization has a statistically significant positive effect on profitability, liquidity, and asset quality, though the impact varies across banks. The results support both the Financial Intermediation Theory and Capital Buffer Theory, emphasizing the role of robust capital structures in ensuring financial stability, profitability, and efficient risk management. The article concludes that while recapitalization is a vital regulatory tool, it must be complemented by broader reforms in corporate governance, risk management, and financial innovation to achieve a resilient banking system. The findings offer timely insights for policymakers, regulators, and stakeholders as Nigeria prepares for a new era of financial sector transformation.

BANK-SPECIFIC DETERMINANTS OF NON-PERFORMING LOANS IN AN EMERGING BANKING SYSTEM: THE CASE OF UZBEKISTAN

Non-performing loans (NPLs) represent a major challenge to the stability and resilience of banking systems, particularly in emerging economies undergoing financial sector reforms. This study examines the evolution of NPLs and the influence of bank-specific factors in the banking sector of Uzbekistan during 2017–2025. The research employs comparative and descriptive statistical analyses using data obtained from the Central Bank of Uzbekistan to investigate the relationship between NPLs, outstanding loans, capitalization, profitability and real interest rates. The findings indicate that rapid credit expansion, particularly during the Covid-19 pandemic, contributed to a substantial increase in NPLs. The study also finds that diversification and stronger capital positions enhance banks’ resilience to credit risk. Besides that, there is an inverse relationship between real interest rate of domestic currency operations and NPLs, supporting moral hazard The results provide practical implications for strengthening credit risk management, improving loan portfolio quality and supporting financial stability in Uzbekistan’s banking sector.

The impact of non-performing loans on bank lending behaviour: Evidence from the capital channel mechanism in Chinese commercial banks

Non-performing loans (NPLs) constitute an important concern for banking stability and credit creation, more so for developing countries where commercial banks play a crucial role in economic growth (Bernanke et al., 1994; Markovic, 2006). Much literature has examined the association between the quality of banking assets and their consequences, but little evidence exists on how NPLs impact bank lending through the capital channel. This study tests the relationship between NPL shocks and banks’ lending behaviour, as well as the moderating effect of the capital adequacy ratio (CAR) and common equity tier 1 (CET1) on this link. The research employs two-way fixed effects (TWFE) and dynamic difference generalized method of moments (GMM) on the unbalanced panel dataset obtained from 42 Chinese commercial banks listed between 2013 and 2023. The results show that a rise in the NPL ratio considerably decreases loan growth rates. This means that worsening credit risk reduces banks’ ability to lend money. While neither CAR nor CET1 stimulates lending, a higher CET1 makes NPLs’ adverse influence greater. Thus, capital buffers improve the solvency position, but they cannot protect against the negative supply-side impacts of declining asset quality. This highlights the need for stronger NPL resolution frameworks and countercyclical capital management.

Bank-Specific and Macroeconomic Determinants of Profitability: Evidence from Private Commercial Banks in Bangladesh

This paper re-examines the determinants of profitability in Bangladeshi private commercial banks, using a panel-corrected standard errors (PCSE) analysis of ten listed banks over 2014–2023 (n = 100 bank-year observations), together with a post-sample assessment of the sector's extraordinary deterioration through 2024–2025. Profitability is measured by return on assets (ROA), with return on equity (ROE) and net interest margin (NIM) used as robustness checks. Results show that capital adequacy and management efficiency significantly enhance profitability, while asset-quality deterioration and non-performing loans (NPLs) exert strong negative effects; liquidity management and bank size are largely insignificant, pointing to inefficiencies in deployment and scale. GDP growth is statistically negligible within-sample and inflation shows mixed effects, underscoring structural weaknesses in financial intermediation. A winsorization check (1st/99th percentiles) confirms that the capital-adequacy and NPL effects are stable to outlier treatment, while the management-efficiency effect is more sensitive. Extending the analysis with Bangladesh Bank, IMF, and World Bank data through 2025 shows that the sector-wide NPL ratio rose from below 10 percent in 2023 to more than 30 percent by late 2025, alongside a collapse in aggregate capital adequacy   a trajectory consistent with, and considerably amplifying, the credit-quality channel identified in the panel results. The study contributes methodologically by applying PCSE in a South Asian context, and offers policy implications for strengthening credit discipline, addressing regulatory forbearance, and improving banking efficiency.

The Relationship Between Bank Capital and Lending Growth in Europe and MENA