Volume 26 • Issue 1 • Year 2026
Applied Econometrics and International Development
Research Article

Do Basel Prudential Ratios Affect Bank Profitability? Evidence from Moroccan Banks

Pages: 10-21

Authors

Hajar Bassim Elidrissi1,*, Said El Bouazizi1

Author Affiliations

  • 1National School of Commerce and Management of El Jadida (ENCG-J), Interdisciplinary Research Laboratory on Organizations (LIRO), Chouaïb Doukkali University, El Jadida, Morocco

DOI

https://doi.org/10.64067/2660-7409.26.i1.02

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Abstract

Background/Objectives: This study examines whether observed Basel capital and liquidity ratios are associated with the profitability of major Moroccan banks during the phased adoption of Basel II and Basel III.

Theoretical Hypothesis: The study expects CAR and Tier 1 to be positively associated with ROA through lower distress and funding costs, and LCR and NSFR to be negatively associated with ROA through lower-yield liquid assets and more costly stable funding. Because higher capital can also reduce leverage and stronger liquidity can lower refinancing losses, the net effect may be weak or context-dependent.

Data and Methodology: A balanced working panel assembled from heterogeneous sources covers ten conventional banks from 2010 to 2023 (140 bank-year observations); a liquidity subsample covers 2015–2023 (90 observations). Random-effects models relate return on assets to capital adequacy, Tier 1, liquidity coverage and net stable funding ratios, with macroeconomic and size controls. Two-way fixed effects and additional sensitivity checks assess specification dependence.

Results and Findings: Capital adequacy, Tier 1 and the post-2015 indicator have no statistically detectable average association with return on assets. The liquidity coverage coefficient is negative only at the 10% level, while net stable funding is insignificant. GDP growth and the policy rate are significant in baseline models, but the GDP finding disappears when 2020 is excluded. Bank-level conclusions persist under two-way fixed effects; other checks remain exploratory because the sample includes only ten banks.

Conclusions and Policy Implications: The results do not reveal a clear average profitability penalty associated with observed prudential ratios, but they do not prove regulatory neutrality or identify optimal regulatory thresholds. Supervisory assessment should combine ratios with business models, funding structure and stress scenarios.

Keywords

  • Moroccan banks
  • capital adequacy
  • liquidity coverage
  • return on assets
  • financial regulation

JEL classification:

  • G21; G28; C23; E52; O55.

How to Cite

Hajar Bassim Elidrissi and Said El Bouazizi. (2026). Do Basel Prudential Ratios Affect Bank Profitability? Evidence from Moroccan Banks. Applied Econometrics and International Development, 26(1), 10-21. https://doi.org/10.64067/2660-7409.26.i1.02

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Applied Econometrics and International Development

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Hajar Bassim Elidrissi*
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© 2026 Hajar Bassim Elidrissi et al.
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