An Analysis on the Risk Based Capital Adequacy Ratio in Iran's Banking System

With regard to the simultaneous relationship between risk and capital, the main determinants of behavior of commercial and Specialized banks during 2001-2009(1380-1388) period was main question of the present paper.Using 2SLS-RE and GMM methods our results show that the endogeneity of two variables(risk and capital) cannot be rejected and on the other hand, the behavior of banks has influenced by; profitability, size of banks, banking reforms and loan losses variables. Also, its worth to note that there is no significant relationship between risk based capital and budget based loans (credits recommended by government).