The Impact of Basel III Capital and Liquidity Requirements on the Stability of Commercial Banks in Iraq

Abstract

This paper examines how the Basel III regulatory levels affect the performance and stability of commercial banks in Iraq between 2018 and 2024. As a result of the 2008 global financial crisis, Basel III has been adopted to enhance capital adequacy, strengthen liquidity provisions, and expand risk management practices to strengthen financial resilience. The banking sector of Iraq, which consists of state-owned as well as privately-owned banking institutions, is facing unique obstacles, namely, political instability, unstable inflows of oil revenues, and insufficient financial infrastructure development. The study adopts a quantitative analysis based on secondary data, which will be obtained through the Central Bank of Iraq and the annual reports of commercial banks. To analyze the links between compliance with Basel III, the capital adequacy ratios, and liquidity coverage with the overall bank performance, hypotheses are developed. The prevailing trend of the Basel III standards being partially applied is shown by empirical evidence with a positive improvement in liquidity management but still a lag in risk-weighted capital adequacy. The research has some contributions to the academic knowledge on the effects of regulation in emerging economies and proposes practical suggestions to enhance the sustainability of the banking industry in Iraq.