| dc.description.abstract | The purpose of this study was to determine the relationship between off-balance sheet
activities and solvency of commercial banks in Kenya. To facilitate and to achieve the objectives of the study, secondary data was collected from commercial banks financial statements. A census survey design was employed.
The findings were that there was a great variation on solvency of the commercial banks dues to changes in risk averaging at -0.517 for the five years. The study also found out that liquidity which averaged at 0.373 has a less impact on solvency whereas profitability standing at 0.469 has a moderate impact on solvency of commercial banks. The study therefore concludes that risks of commercial banks as a result of banks including off- balance sheet activities in the trading operations increases overall risks and thus affects solvency and stability and was found to be the main contributor of bank insolvency. This is an indication that change in solvency of commercial banks could be accounted for by changes in risk, liquidity and profitability.
The recommendations were that there is need for commercial banks in Kenya to maintain an adequate level of liquidity which depends on the institution’s ability to efficiently meet both expected, unexpected cash flows and collateral needs without adversely affecting either daily operations or the financial condition of the institution. There is need for Commercial banks in Kenya to increase their short term assets it was revealed that increase in banks liquidity positively influence the solvency of the banks. There is need for commercial banks to decrease their operation risk as it was found that risk is negatively associated with solvency of commercial banks | en |
