Influence of Capital Adequacy on the Growth of Banking Sector in Bangladesh

Basel Committee on Banking Supervision determines today’s regulatory framework for bank capital adequacy. Holding adequate capital is emphasized so that banks can safeguard themselves against default risk and many other risks. This study focuses on impact of holding enough capital on growth of banking sector. That is, by reading this article one will be able to know how holding adequate capital fasters the growth of banking industry. The study has shown the relationship among capital adequacy, solvency, credit risk and profitability. All the variables have positive impact on capital adequacy. To show the relationship factor analysis, regression analysis and using secondary data have been conducted. Scenario of capital to risk weighted asset have been shown, to reveal the true picture. Capital adequacy under BASEL has helped to reduce large bank’s dominance which basically ensures the growth of a bank. This study will show why holding enough capital is momentous and what are the indicators that influence capital adequacy.