At this moment, this research investigates the effect of bank capital, charter value, information systems, “internal/external” control systems and market discipline on bank risk. Therefore, this research tries to understand that to what extent Basel III increases the stability of the banking sector. And to what extent the Palestinian banks are ready to apply Basel III. Moreover, this research investigates the countercyclical buffer effect on the Palestinian economy. In addition to the basics and preparations required to develop those systems according to the international banking control standards and guidelines "Basel committee requirements for banking supervision." This raises some questions.
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Chapter 2 Hypotheses Development
2.1 Introduction
The development of capital adequacy standard in banks came as a result of the growing sense that the fundamental issue in bank management – if not in the financial sector in general – is the subject of risk management. No doubt that risks in modern economy offers to trader?s opportunities and challenges alike.
Basel Accord III came because of this fact, by setting the risk issue in the lead. Basel III recommendations are not only a focus on risk management concept in general. However, it also includes the restoration of the instruments (bank capital, charter value, information systems, control systems and market discipline) in estimating these risks [58, 59]. Hence, the starting point to draw out the new directions for Basel Accord III by addressing each of Basel II and I. Banks are now consider less risk because of Basel factors, which lead to increase bank sectors stability. Indeed, this chapter will explain associated hypotheses, which can in chance to investigate new Basel factors on bank risk.
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2.2 Research Hypotheses
This research uses three models to investigate the hypotheses value. The first model determines the suitable approach mentioned on Basel III and studies the effect of a countercyclical buffer on Palestine economy. The second model studies the effect of Basel instruments on bank risk enhanced to answers of the main research question. The third model investigates Basel principles mentioned in these agreements in order to develop credit measurement and apply new techniques, which are considered one of the most important tools to monitor credit and manage bank risk.
Figure 2-1 shows the hypotheses structure based on Basel III factors. Where CAQ is capital adequacy, MBR is managing bank risk, MCR is managing credit risk, CR is credit risk, A-IRA is an advance internal r
