EFFECT OF CENTRAL BANK OF KENYA PRUDENTIAL GUIDELINES ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS. CASE STUDY OF COMMERCIAL BANK IN CBD NAIROBI
Abstract
The increase of bank’s financial performances can be achieved through forming good and relevant rules for banking activities. The main objective of this study was to find out the effect of CBK prudential guidelines on financial performance of commercial banks. The study was guided by three independent variables which were: to find out the effect of rate cap law on financial performance of commercial banks in Nairobi CBD, to examine the effect of capital adequacy on financial performance of commercial banks in Nairobi CBD, and to find out the effect of liquidity management on financial performance of commercial banks in Nairobi CBD. The scope of the study was based on commercial banks in Nairobi CBD. Descriptive research design was used in the study. The study population was 43 managers of all licensed commercial banks in Nairobi CBD. Questionnaires were self-administered for data collection. Statistical package for social sciences (SPSS) was used to analyze data. The study found that the Rate Capping Law was not achieving its primary objective of making credit accessible to the low income earners at an affordable prize. The study further found that capital adequacy and liquidity management are important regulations that positively affect financial performance of commercial banks. Therefore, the study recommended the review of rate capping law by the relevant authority because it had failed to achieve its main objective to ease the access of credit to low income earners. The study also recommended that both capital adequacy and liquidity management are very important regulations that positively affect financial performance of commercial banks in Nairobi CBD hence Central Bank of Kenya should ensure they are strictly complied with by all banks.
Keywords: rate cap law, capital adequacy, liquidity management, financial performance, commercial banks in Nairobi
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DOI: http://dx.doi.org/10.61426/sjbcm.v5i3.849
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