The banking sector regulatory Framework in Kenya: its adequacy in Reducing bank failures
Abstract
This study set out to achieve the following two objectives:
To identify the most dominant factors causing bank failures in Kenya.
To assess the adequacy of the banking sector regulatory framework in
reducing probability of bank failures in Kenya.
Secondary data obtained from various Central Bank of Kenya publications,
and the Banking Act Chapter 488 of Kenya laws, was used in the study. Data
analysis was done using the SPSS statistical package. Cross tabulation of
cause of institutions failures and the number of institutions in which they
occurred was done. Frequency distribution tables were generated from the
data collected and a summary of the causes tabulated. A review of the legal
provisions in place over the period was then done to assess the adequacy of
the various sections of the law in cubing the various causes of failures.
The results of the study indicated that the Kenyan regulatory framework was
fairly comprehensive in coverage and adequate in content to reduce the
probability of failure. The framework hinged on very clear and independent
Acts i.e. the CBK Act and the Banking Act. It was also apparent from the
analysis that some failures precipitated due to the delay of the
supervisor/regulator in promptly and effectively implementing the provisions of
the law. Some provisions of the Act, which would be invoked to forestal
problems, were not and have not been applied at all.
As Tanner 1990 puts it "if action is not implemented in a timely and efficient
manner, the crisis may get out of hand".
Citation
MBASponsorhip
University of NairobiPublisher
University of Nairobi School of Business, College of Humanities and Social Sciences