Capital ratios of US banks

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.