The Impact of the Adherence to Basel Rules on Banking Risk Management: Jordan Kuwait Bank Case Study

Conference paper
Part of the Lecture Notes in Mechanical Engineering book series (LNME)


It is essential for the financial institutions to have adequate capital in order to meet their obligations and to absorb unexpected losses. Therefore, this study aims to demonstrate the impact of the Basel rules on risk management in Jordanian banks, and how to approach a standard of capital adequacy approved by the Basel Committee on Bank Supervision (BCBS). A case study is conducted using the Jordan Kuwait Bank in order to achieve the purposes of the study. The financial statements of the bank covering the years 2011–2015 are examined to check its commitment in implementing the Basel rules and the impact on the banking risk management and continuity of the bank’s future activities. The study concluded a number of results. The most important one is the commitment by the Jordan Kuwait Bank in applying the Basel rules II on Bank Supervision and the ability to achieve the required rate of adequacy of capital money, which exceeded the prescribed percentage (8%) over the five years of study. This reflects the presence of strong capital adequacy that is able to support the continuity of the bank and absorb any unexpected losses or shocks, and thus the efficiency of banking risk management. One of the main recommendations of the study is the need for a decision by the Central Bank of Jordan to strongly encourage Jordanian banks to apply the requirements of Basel III in order to enhance banking risk management, and to increase foreign banks’ confidence in dealing with them.


Banking Basel rules Capital adequacy Risk management 


  1. 1.
    Abo-Mohemid M (2008) Islamic funding risks and its relation to Islamic Banks’ capital adequacy through Basel II standard. Dissertation, Arab Academy for Banking and Financial Sciences, pp 26–27Google Scholar
  2. 2.
    Al-Biltaji M (2005) A proposed model to measure the risks in the Islamic Banks: field study. The Banking Institute, Saudi Arab Monetary Fund, p 12Google Scholar
  3. 3.
    Al-Sheikh Hasan M (2005) Measuring Islamic Banks solvency in the new frame of capital adequacy. A paper presented to the international conference of the third Islamic conference, Umm Al-Qura University, Makkah Al-Mukarramah, p 8Google Scholar
  4. 4.
    Al-Zo`bi T (2008) Developing a model of calculating Islamic Banks’ capital adequacy based on Basel committee instructions: application study on Islamic Arab Bank and the Palestinian Islamic Bank at Gaza sector. Unpublished thesis, Islamic University, faculty of Commerce, Gaza, pp 83–90Google Scholar
  5. 5.
    Bo-Bozian M et al (2011) The Islamic Banks and new reservation standards and systems: status of Basel III application. A paper presented to the international eighth of Islamic economy and finance, Qatar, pp 10–26Google Scholar
  6. 6.
    Egyptian Ahli Bank (2001) Systems of banking supervisory in the developed countries. Econ Bull 54(4):24Google Scholar
  7. 7.
    Hashad N (2004) Your guide to Basel II. Union of Arab Banks, Part II, p 30Google Scholar
  8. 8.
    Karasnah I (2006) Basic and modern frame of the banks’ control and risks management. Arab Monetary Fund, Institute of Economic Policies, Abo-Dhabi, p 39Google Scholar
  9. 9.
    Keegan M (2004) Management of risk, principals and concepts, H M treasury. The Orange Book, Working Papers, p 9Google Scholar
  10. 10.
    Nasr A, Abo-Salah M (2007) Operational risks according to Basel II requirements: a study of its nature and ways of managing them in the operating banks in Palestine. A paper presented to the fifth annual scientific conferences, Philadelphia University, pp 10–12Google Scholar
  11. 11.
    Sha`bo FB (2012) Effect of Basel II standards’ application on Islamic Banks’ liquidity and profitability. Thesis, University of Halab, pp 9–42)Google Scholar
  12. 12.
    Soliman N (2010) Do the Islamic banks need Basel III?
  13. 13.
    van Gestel et al (2009) Credit risk management, basic concepts: financial risk components, rating analysis, economic and regulatory capital, p 352Google Scholar

Copyright information

© Springer International Publishing AG, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Al-Zaytoonah University of JordanAmmanJordan

Personalised recommendations