"ANALYSIS OF THE IMPACT OF MARKET RISKS ON CAPITAL ADEQUACY IN LIGHT OF BASEL COMMITTEE (III) REQUIREMENTS AN APPLIED STUDY ON AL MANSOUR INVESTMENT BANK FOR THE PERIOD” (2020–2025)

Abstract

Market risks are one of the biggest problems a banking company is dealing with in an unstable financial environment. They have an indirect effect on the price of assets and liabilities, and in turn, to cloud banks' financial health. The Bank for International Settlements issued the Basel Accords in 1988, which were intended to promote consistent banking practices that would ensure the stability of the banking operations. Another notable aspect of these accords was the minimum capital adequacy ratio threshold of 8% for commercial banks and globally uniform standards to limit credit risk. However, the volatility of the financial and economic environment and growing complexity of banking operations showed some weaknesses in this agreement, which was revised in 1996 as Basel II. This deal stressed regulatory control and supervision of capital adequacy ratios. The Basel I and Basel II could not survive without recommendations for changes from the gaps created during the 2008 global financial crisis, thus prompting the need to amend the issues under a new global framework known as Basel III. Under this new agreement, commercial banks must set aside at least 8 percent of their risk-weighted assets to cover expected losses and at least 2.5 percent of their capital for possible losses. Capital protection through high risk states -> an increase in the minimum capital adequacy ratio for banks from 8 to 13%. According to what was previously mentioned, this study is based on the literature reviewed concerning the analysis of how well market risks affect banks financial solvency in view of Basel III requirements (Al-Mansour Investment Bank) as a case study for the period (2020-2025). The significance of this study is, it emphasizes some bank data in order to evaluate the relationship between market risk indicators and capital adequacy ratio. This enables assessing the direction and impact size as well as how its is related to regulatory requirements that will be adopted in line with international supervisory standards, complied within the Iraqi banking climate. Which in turn, achieves results that help to box stability and increase the effectiveness of the risk Management process within this Banking sector as well. The study reached the conclusion that Al-Mansour Investment Bank was characterized by high levels of financial solvency and capital adequacy, as they exceeded the supervisory requirements contained in Basel III. This is a testament to how robust its balance sheet is and how capable it is of - in principle - weathering an unanticipated loss. They also also found that market risk was the most significant determinant of bank capital results, particularly in periods of high volatility. But they did not overcome the limits of control. The study confirmed the need for Strengthening risk management practices and creating hedging instruments and stress tests to protect the health of Upon which the continued banking domination at economy increasingly fraught with danger.