INFLUENCE OF PRUDENTIAL REGULATIONS ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA
Abstract
Prudential regulations have often been associated with financial behavior of banks. Efforts to revive ailing and collapsing banks have always focused on tightening prudential regulations in an effort to curb financial crises in the banking sector and promote financial stability in the whole financial system. This study investigated the influence of credit facilities regulations on financial performance of banks in Kenya. The population was 43 banks for the period 2012 to 2016. Descriptive research design was applied due to its accuracy. Survey methodology was applied to all 43 banks since this enhanced validity of data obtained by addition of relevant information and cases to the study. Secondary data obtained from CBK annual reports and banks end year financial statement. SPSS was used to analyze data and presented using tables because this was easier to communicate the findings to readers. The study findings showed a positive correlation between prudential regulations and financial performance (R= 0.547 with ROE and ROA). It was clear that prudential regulations had positively contributed to financial performance of commercial banks in Kenya and there was variation on financial performance due to changes in credit facilities regulations. The study recommended that commercial banks should adhere to prudential regulations to ensure financial stability and increased financial performance coupled with increased volume of business. Furthermore, CBK should discourage additional costs on credit facilities through designing convenient loan management protocols and shorten long channels involved while bank managers should invest in liquid assets and improve on their credit policies in order to increase their financial performance. The study concluded that credit facilities regulations influenced financial performance of commercial banks in Kenya.
Key Words: Prudential Regulations, Credit Facilities Regulations and Financial performance
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DOI: http://dx.doi.org/10.61426/sjbcm.v5i4.947
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