;This research examines the correlation between capital adequacy ratio(BIS ratio) and bank operating performance. The samples contains 32 quarterly data of BIS ratio and bank operating performance from the 1st quarter of 2006 to the last quarter of 2013, which are based on 30 commercial banks in Taiwan. In order to find the correlation between BIS ratio and bank operating performance, the research examines six performance variables including non-performing loan ratio(NPL ratio), return on equity (ROE), return on assets (ROA), net interest to net income margin, net income margin and employee contribution for their individual relationship with BIS ratio and tier 1 capital ratio by using descriptive statistics, Pearson′s correlation coefficient and simple linear regression model. Results of our analysis appear below.
1.Compared among banks categorized as quasi government-run, private banks and divided by market capital TWD 30 billion:
(1) Basel agreement has clear influence on the control of BIS ratio, private banks greater than quasi government-run banks and banks with market capital below 30 billion higher than the opposite.
(2) As to operating performance, quasi government-run banks with market capital above 30 billion lag behind private banks with market capital below 30 billion in terms of net interest to net income margin except NPL ratio, ROE, ROA, net income margin and employee contribution.
2.The whole BIS ratio, tier 1 capital ratio, and NPL ratio all demonstrate smaller than average standard deviation, representing small individual difference. while ROE, ROA, net interest to net income margin, net income margin and employee contribution evidence the opposite, representing high individual disparity.
3.Controlling BIS ratio and tier 1 capital ratio both are significantly positive to bank operation performance on ROE, ROA and employee contribution while also positive on net income margin but insignificantly. On the contrary, they are significantly negative to bank operating performance on NPL ratio and net interest to net income margin, exclusive of tier 1 capital ratio to net interest to net income margin.