Publication: Central bank of Kenya regulatory requirement and financial performance of commercial banks in Kenya, case of Embu town.
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2024-09-09
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Mount Kenya University
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Abstract
Despite the 2013 CBK prudential standards' implementation, which governs commercial banks in
Kenya, proposed project aimed at investigating the impact of various prudential standards set by
the Central Bank of Kenya (CBK) on monetary ability of banks in Embu town. The study focused
on three specific prudential standards: minimum capital requirements, reserve requirements, and
central bank publication of commercial bank charges on loans. The study aimed in determining
the connection between corporate governance and commercial banks' financial success.
To achieve these objectives, the researchers planned to collect primary data from 22 significant
bank officials selected randomly from the Kenyan Commercial Bank and the Family Bank in
Embu Town. They will use a questionnaire to gather quantitative data. To examine data gathered,
descriptive and inferential statistics were used. Theoretical foundations of research are Agency
Theory and the Loanable Theory, which guide the interpretation and analysis of the findings. The
ultimate goal of the study is to provide empirical data that can help Kenya's central bank in
evaluating financial stability of commercial banks in Embu town. Potential benefits in this project
include shedding light on impact of prudential standards on bank performance, providing insights
into the effectiveness of corporate governance in the banking sector, and offering valuable data for
further studies in this area. Fifty nine point one percent of Survey respondents are aged between
25 to 30 years thus most of participants are aged between 25 to 30 years in commercial banks.
Sixty eight point two percent of survey respondent have degree and twenty seven point three
percent of the respondents have masters level. Therefore most of respondents have degree level in
their education. Forty five point five percent of respondents have worked for 2 to 5 years as credit
manager in this institution, twenty seven point three percent of respondents have worked for 6 to
10 years and four point five percent of respondents have worked for 11 years and above thus most
of the respondents have worked for 2 to 5 years. The research findings indicate that the financial
performance is impacted by the regulatory requirements of the Central Bank of Kenya, specifically
in terms of capital requirements.. Thirty one point eight percent of respondents depicted capital
requirement structures of banks are highly regulated, eighteen point two percent of the respondents
agree, while forty five point five percent of respondents were uncertain. The study recommends
central bank should have a policy which ensures commercial bank should have adequate capital requirement. This policy will ensure banks are well regulated thus protecting the welfare of all the
stakeholders. The bank should also supervise and oversight their systems which enables them to
compute minimum capital requirements adequately.
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Keywords
Central Bank of Kenya, Bank performance, Foundations, Commercial bank