CENTRAL BANK OF KENYA REGULATORY REQUIREMENT AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA, CASE OF EMBU TOWN

Wario Abduba Hassan, Dr. Jennifer Muriuki

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 minimum capital requirements and reserve requirements. 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. Questionnaire was used to gather quantitative data. To examine data gathered, descriptive statistics was 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. 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. A reserve requirement is one of the major challenges that commercial banks face during the start-up process, thus negatively affecting the stability of the commercial banks. 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.

Keywords: Minimum Capital Requirement, Reserve Requirement, Financial Performance


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References


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