Comparative analysis of capital adequacy for participation banks within the framework of Basel III accord

In global financial system, the banking sector is one of the most important elements of the general economy. For the proper functioning of financial system, the banking sector should have a capital structure that is resistant to national/international crises. Therefore, G10 countries have developed international auditing standards against the potential risks that banks may face. Basel accords, which aim to protect the banking sector against possible risks and provide effective risk management and control, were first published by the Basel Committee in 1988, then by Basel II in 2004 and finally by Basel III in 2010. In the accord published as Basel III, amendments were made regarding the increase in the quality and quantity of capital, capital protection buffer, non-risk-based leverage ratio and liquidity, and it was decided that Basel III would be applied gradually throughout the banking system until 2019. Within the framework of Basel accords, the Capital Adequacy Concept has focused on the amount of capital that should be kept to a minimum in order to minimize the costs that depositors may face if a bank fails, and this approach has been an important step towards risk measurement in terms of global banking. Additionally, in order to prevent possible crises that banks may face and to ensure the sustainability of the banking system in a healthy way, the restrictions imposed to minimize the risks taken by banks are called capital adequacy ratio. Furthermore, the participation banking, which has significantly developed over the last quarter century in Turkey and is one of the financial preferences of relatively more conservative individuals is a strategically important type of banking both macroeconomics and real economy. In terms of macroeconomics, it rises the government tax revenue, and tackles the shadow economy. Besides, in real economy, these banks use their funds in commercial and industrial activities. The aim of this thesis is to evaluate the capital adequacy ratio of the participation banks actively operating in Turkey with the graphical analysis method within the framework of Basel III. Moreover, in the face of financial, economic and political crises, the financial structure sensitivity of the participation banks by using descriptive analysis is investigated. Keywords: Participation Banking, Basel Accord, Capital Adequacy, Capital Adequacy Ratio