CAPITAL CONTROLS AND THE LENDING BEHAVIOUR OF SOUTH AFRICAN BANKS: PRELIMINARY FINDINGS ON THE EXPECTED IMPACT OF BASEL II

Banking regulation has developed rapidly over the past few years. There is a growing realization that the regulatory environment must keep pace with globalization and with advances in the financial sector. The 1988 Basel Capital Accord was an attempt to align regulatory capital with the actual underlying risks that banks face, thereby improving the soundness of the banking sector. The New Basel Capital Accord, due for implementation in South Africa in 2007, refines this principle and remedies some of the flaws of the 1988 Accord. This paper considers whether such implementation would have an effect on lending patterns and credit expansion in South Africa. It falls into five parts. Section 1 examines the rationale for the 1988 Basel Accord and outlines the relevant features of the New Accord. Section 2 reviews some of the criticisms directed towards the New Accord, concentrating on the speculation that its implementation will adversely affect bank credit expansion. Section 3 proposes a method of research for assessing the effect of the New Accord in South Africa. Section 4 analyses the trends in South African banking and considers how the New Accord may affect bank behaviour. Section 5 concludes.     

The Dimensions of Service Quality: The Original European Perspective Revisited

The early pioneers of services marketing in Europe, especially the Nordic School, argued that service quality consists of two or three underlying dimensions. Lehtinen and Lehtinen [1985] referred to physical and interactive quality while Christian Grönroos [1984] identified a technical dimension, a functional dimension and the firm's image as a third dimension. In later years, Parasuraman, Zeithaml and Berry [1988] published empirical evidence from five service industries which suggested that five dimensions more appropriately capture the perceived service quality construct. This study uses an exploratory factor analysis approach to investigate the empirical factor structure of the SERVQUAL instrument developed by Parasuraman et al. [1988] to measure perceived service quality. Based on the results of five exploratory analyses performed on five SERVQUAL data sets, a model for SERVQUAL is proposed. It suggests that the SERVQUAL difference scores are measures of two factors termed ‘intrinsic’ and ‘extrinsic’ service quality. The model is then fitted to the SERVQUAL data obtained from five samples of clients who evaluated the services of five service industries or companies by means of confirmatory factor analysis. The results of this study provide empirical support for the European authors who, in the early 1980s, argued that service quality perceptions are largely determined by two (rather than five) dimensions.