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. It’s evident that prudential regulations are critical issue in dealing with bank failures that has been discussed in different concepts and perspectives. The main objective of this study is to examine the influence of prudential regulations on financial performance of banks in Kenya. The influence of capital requirement regulations on financial performance of banks in Kenya was the specific objectives of this study. The population was 43 banks for the period 2012 to 2016. Descriptive research design was used since it’s suitable for description and measurement of phenomena with high level of accuracy. Survey methodology was applied to all 43 banks since this enhances 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 was used since data obtained is valid. SPSS and excel spread sheet was used to analyze data and be presented using tables because this can easily 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 evident from results that prudential regulations have positively contributed to financial performance of commercial banks in Kenya and there was variation on financial performance due to changes in capital requirement regulations. This study recommended that banks should adhere to prudential regulations in order to withstand shocks and increase financial performance. The study further recommends that commercial banks should adhere to prudential regulations to ensure financial stability and increased financial performance coupled with increased volume of business. The study concluded that capital regulations influenced financial performance of commercial banks in Kenya.
Keywords: Prudential regulations, financial performance.
Title: Influence of Prudential Regulations on Financial Performance of Commercial Banks in Kenya
Author: MUSABI ANTONY BARASA, Dr MBITHI MUTUA
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
Research Publish Journals
