Effect Of Central Bank Of Kenya Regulations On The Financial Performance Of Commercial Banks Listed At The Nairobi Securities Exchange In Kenya.

Abstract

Bank regulations are of a growing concern in banking sectors due to rapid changes in business environment. The main aim of this research was to test the effect of Central bank of Kenya regulations on the financial performance of commercial banks listed at the Nairobi Securities Exchange (NSE). The research problem was that, despite review of bank regulations in 2013 by Central Bank of Kenya for the performance improvement, some bank such as Chase bank, Imperial Bank and CFC Stanbic bank encountered financial problem in the year 2015 and 2016 were in the same period National Bank surprised its investors by registering a loss of 1.2 billion in the year 2015 which was almost the same as the profit of 1.3 billion they made in the year 2014. On the other hand, other banks such as KCB, Cooperative bank of Kenya and NIC bank had shown positive performance since the review of regulation by CBK in the year 2013. STATA 9 software was used to analyse secondary data which was collected from the eleven (11) listed commercial banks in Kenya for a period between 2012-2016. In descriptive statistics mean and median were very close indicating that, data does not suffer from any outlier problem. Data was analysed using descriptive statistics and panel data regression analysis. The findings of the study indicated that, liquidity management regulation had insignificant positive relationship with the performance of the listed commercial banks in Kenya while credit risk management regulation had an insignificant negative relationship. Capital adequacy regulations had significant negative relationship with banks performance for studied period. The results for the study revealed that, there is need for CBK to enhance their commercial banks regulations in Kenya for better performance. Holistic and integrated regulatory policy approach should be adopted to strengthen market regulations in order to ensure the achievement Kenyan vision 2030 of Kenya being the financial centre in Eastern and Southern Africa.