| dc.description.abstract | Despite introduction of CBK prudential regulations of 2006 governing commercial banks
in Kenya, there are no systematic studies that critically assess how regulations have
affected the financial performance of commercial banks. Thus this study sought to
establish the effects of CBK Prudential Regulations of 2006 on the financial performance
of commercial banks in Kenya. This was a comparative study on the effects of CBK
Prudential Regulations of 2006 on the financial performance of commercial banks. The
study covered a twelve year period from 2001 to 2012; six years prior to implementation
of the prudential regulations (2001-2006) and six years after implementation of the
prudential regulations (2007-2010).
The descriptive research methodology was adopted in this study. The population of
interest in this study consisted of all the duly licensed commercial banks operating in
Kenya. The study used secondary quantitative data to determine the effects of CBK
Prudential Regulations of 2006 on the financial performance of commercial banks. The
data was sourced from Central Bank of Kenya’s Bank Supervision Department. These
were in form of financial reports of the banks involved covering a twelve year period
from 2001 to 2012. Regression analysis was used to analyze the data.
The study revealed that there was great positive variation on the financial performance of
commercial banks due to changes in Capital Adequacy, Liquidity Management, Risk
Classification of Assets and Provisioning, Foreign Exchange Risk Exposure and
Corporate Governance. This is an indication that CBK prudential regulations had great
positive effects on the financial performance of commercial banks. The adjusted R
squared value for the period after introduction of CBK prudential regulations 2006 was
found to be greater than that of the period prior to to the regulations an indication that the
regulations greatly influenced the financial performance of commercial banks.
The study recommended the need for CBK to enhance their prudential regulations on
commercial banks in Kenya, as it was revealed that CBK prudential regulations enhance
the financial performance of commercial banks in Kenya. However, a holistic and
integrated regulatory policy approach is advocated to strengthen market regulation
without stifling competition, innovation and financial access. | en |
