| dc.description.abstract | Commercial banks perform the function of financial intermediaries. They take deposits from savers and give loans to borrowers. In order for commercial banks to operate efficiently they must have adequate capital. Adequate levels of capitalization ensure public confidence. This is important if a bank is to acquire customer deposits. It also allows banks to absorb unanticipated losses and in so doing prevents bank collapse.
The objective of the study was to determine the relationship between capital adequacy and stability of Commercial Banks of Kenya. All Commercial Banks in Kenya were analysed. Secondary data was used and this was collected from the financial statements for the year ended 3151 December 2009 On the face of it Kenyan banks are on average well capitalized. They have met all the requirements (statutory) as set by the Central Bank of Kenya. However, on closer . scrutiny, tier I commercial banks have a much stronger capital position than tier II and III commercial banks.
Not all commercial banks have achieved the minimum core capital of Kshs. 1 billion. With respect to supplementary capital, majority of Banks were found to have supplementary capital reserves. However, very few were found to have no supplementary capital. Banks which have not met the minimum statutory requirements have not also met the stability measures. Therefore a bank that is undercapitalized is not stable | en_US |
