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Empirical Analysis of Iraqi Banks Journal of Xi'an University of Architecture & Technology Issn No : 1006-7930 The Role of Accounting Information System in The Evaluation of Financial Performance Under Basel III: Empirical Analysis of Iraqi Banks Zahra Hasan Oleiwi Accounting Department, Faculty of Administration and Economics, Mustansiriyah University, Baghdad, Iraq Email- [email protected] Abstract- The research aims to provide a theoretical framework on the role of the accounting information system in assessing the disclosure requirements of the Basel Committee and the stages of its development, the extent of their applicability in the Iraqi environment and the ability of Iraqi banks to adhere to them. And the extent of the impact of adherence to the main criteria touched upon by the decisions of Basel III, which are the ratio of capital adequacy, liquidity ratios, leverage ratio and its impact on the level of profitability. And the measurement of those standards in actual reality using the equations recommended by the committee, as well as the use of statistical methods (such as the Pearson coefficient) for a sample of banks listed on the Iraq Stock Exchange. The results show the ability of the accounting information system in Iraqi banks to meet the requirements of implementing the Basel standards represented in their new proportions. Likewise, there is an abundance of liquidity and capital in banks, the sample of the research has not been invested in a manner that reduces the severity of the economic recession and the revitalization of economic business units in a way that helps to establish a safe investment environment. The results also show that there is an inverse relationship between (capital adequacy, liquidity coverage, net stable financing and financial leverage) and the level of profitability. The new standards are considered important because they are able to penetrate into the depth of the banking structure and feel the weaknesses and strengths in its pivotal structure, which is represented in the banking capital, because of the existence of a structural link in all the standards recommended by the Basel Committee. Keywords – Accounting Information system, Bank risks, Basel III, Iraqi Banks I. INTRODUCTION There is no doubt that the financial crisis that surrounded the global economy has a major impact on the development of the Basel Committee for its standards, in addition to keeping pace with the various changes that occur in the structure of the economy in general. The nature, importance and impact of these changes on the financial and banking sector in particular. From this principle, the Basel Committee maintained its general structure, represented by its three pillars (capital adequacy, supervisory supervision, and market discipline). But the new Basel III is characterized by substantial additions to the strengthening of banking capital [1-2]. The reason for this is due to the effect of the bio as props for any sudden or periodic vibrations. It also developed two new ratios (liquidity ratio, which the committee divided into liquidity coverage ratio, which is a short-term ratio and the ratio of net stable financing, which is a long-term coverage ratio), in addition to the rate of dependence on others to finance its various activities, which is the percentage of leverage [3]. These ratios work together to support banking capital and enhance its capabilities, to be able to face any of the risks, whether regular or irregular. In order to achieve a decrease in the chances of default or bankruptcy, and these two percentages also work to capture the risks that the first percentage did not feel. The most important feature of Basel III is its introduction of bank capital or parts of it in all new ratios, directly or indirectly, and it has thus directed the spotlights directly to the solid core in the body of the banker. It is represented by his own financial capabilities and the size of his defense liquidity and his interactive policies with the financial markets and the economic environment. The importance of benefiting from international experiences and experiences to overcome the Iraqi banking sector its plight and achieve its desired vitality, it was hoped that it will apply the latest international standards regulating the banking sector to help it to integrate quickly, and achieve the maximum possible variety of facilities provided by it [4-5]. To mitigate the risks that surround it. To form with the prevailing national laws a container that can result in developmental leaps, and faster steps for development and harmony, to align them with the aspirations of society for this vital and influential feudalism. Accordingly, we have an important question: Are Iraqi banks able to implement the Basel III standards, which focused in most of its fundamental aspects on enhancing the banking capital, then does the application of the standard affect the level of profitability, which is a key factor in the development of business and the encouragement of investors and investment. Volume XII, Issue II, 2020 Page No: 1528 Journal of Xi'an University of Architecture & Technology Issn No : 1006-7930 II. LITERATURE REVIEW 2.1 Accounting information system and requirements of Basel III– The world has known financial crises since the beginnings of the seventeenth century, and they have recurred in a number of ways, leaving behind economic disasters and often threatening the world order [6]. All eyes were on the Basel Banking Supervision Committee. Moreover, its vital and effective role in being one of the most important organizations concerned with financial stability. As a result of criticism directed at the Basel Committee in that it sets the standards regulating the work of banks and the resultant commitment to them. From the impact on the bank’s work, competitiveness, and the inability of its Basel II standard to limit and mitigate its severity, as it sought to amend its Basel II standards and move to Basel III, as a result of that financial crisis that exploded in 2008, and its attempt to create a safe banking work environment. The financial crisis in 2008 may be one of the main reasons for Basel's elaboration and development of its standards. The financial crisis in general is a sudden and severe turmoil in some economic balances followed by collapses in a number of financial institutions that extend its effects to other sectors [7]. Al-Saabri defines it as the collapse of the financial system and the failure of financial institutions as a whole, with a sharp contraction of the overall economic system (Al-Saabri, 2012). Although some indications were indicating that a potential financial crisis existed, the Basel Committee or any other financial organization was unable to determine its timing, extent and impact. Financial analyzes revealed before the crisis that the volume of international real output amounted to about 60 trillion dollars, while the volume of transactions in financial assets and products amounted to 630 trillion, which is more than ten times the real output [8- 9-10]. Also, the decrease in liquidity rates in American banks as a result of raising the basic interest rate by the Federal Bank from 1% to more than 5% to address inflation in the American economy [11]. The turbulence of exchange rates for international currencies and withdrawing deposits with banks [12]. These were the primary and other indicators that foretold the world of the possibility of a financial crisis, which made financial and economic analysts work to determine the causes of that crisis after its occurrence and the most important reasons were as follows: 1. Excessive and excessive credit expansion: which negatively reflected on the economic cycle, and that credit granting operations took place on unscientific grounds, and the most dangerous of that is the knowledge of banks that borrowers are unable to repay, as well as the excess of interest that reaches 100%, and that this excess In lending, including real estate loans, whose owners were unable to pay and increased their market offer and led to lower prices [13]. 2. Weak supervision of banks and financial institutions, and financial institutions mean "banks, insurance companies, real estate finance companies, the capital market, securitization companies and other financial companies. There is no doubt that these financial institutions have an important and dangerous impact on the economy of any country, and despite this, the multiplicity of devices The control over the activities of the financial sector and the lack of coordination between them, its weak role in identifying the imbalances and abuses in the work of these institutions [14]. 3. Growth, breadth and excessive use of financial instruments: With the emergence of new and innovative financial tools with diversified uses such as financial derivatives and securitization, various types of diverse financial assets have been issued independently of the real economy and hence the seeds of financial crises began because of the disconnection between the financial economy and the real economy [15]. Financial derivatives are those new and diversified investment tools, named by this name because they are derived from traditional investment tools such as stocks and bonds, or related to real products or commodities [16]. The other and important type is securitization or securitization, and the word securitization refers to an Arabization of the English economic term (Securitization) which means making deferred debts in the hands of others a negotiable instrument in the financial market, and banking securitization is a new financial tool that benefits a financial institution mobilizing a group of debts Homogeneous and secured as assets, and put them in the form of one debt- enhanced credit and then presented to the public through a specialized facility to subscribe in the form of securities. To reduce the risks and to ensure the continuous flow of cash to the bank.
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