Abstract:
The study empirically examined regulatory role of Basel Capital Accord in reflecting the solvency of commercial banks. The impact of bank specific risk variables and economic indicators on Capital Adequacy Ratio (CAR) of commercial banks of Pakistan was tested in panel data setup employing fixed and random effects modelling with annual data collected from 25 commercial banks for the period from 2007 to 2014. Credit risk and operational risk variables tested by the study showed significant statistical impact however, economic activity showed no statistical impact on Capital requirements of the commercial banks.