EFFECT OF GOVERNMENT REGULATIONS ON PROFITABILITY OF COMMERCIAL BANKS IN KENYA
Abstract
The study sought to evaluate the effect of government regulations on the performance of commercial banks in Kenya. The research adopted a descriptive research design. The study focused on 42 commercial banks in Kenya. Secondary data was collected from audited annual financial reports for individual banks found on the banks website and at the Central Bank of Kenya website and library. The study used census method of sampling and sampled all 42 commercial banks in Kenya. Data was analyzed by both qualitative and quantitative approaches. The study used regression model. The data was summarized and presented using tables and charts. The study concluded that forex exposure cap negatively affects profitability of commercial banks in Kenya. On the liquidity regulation ratio, the study concluded that there exists a positive relationship between liquidity regulation ratio and profitability of commercial banks in Kenya. The study concluded that there exists a positive relationship between interest rate cap and profitability of commercial banks in Kenya. Similarly, the study concluded that there exists a positive relationship between capital adequacy requirements and profitability of commercial banks in Kenya. The study recommended that the managers of commercial banks should adopt new interest rates in that they are able to attract more borrowers so that they can make good profits by increasing the number of borrowers.
Key Words: Capital Adequacy, Liquidity Regulation Ratio, Interest Cap, Forex Exposure Cap, Profitability, Commercial Banks
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DOI: http://dx.doi.org/10.61426/sjbcm.v5i1.660
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