Effects of Basel III Framework on Capital Adequacy of Commercial Banks in Kenya (original) (raw)
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Importance of Capital Adequacy Requirements in Basel III Framework for Commercial Banks in Kenya
American Journal of Finance
Purpose: The purpose of the study was to examine the importance of capital adequacy requirements in Basel III framework for commercial banks in KenyaMethodology: A descriptive survey design was applied to a population of 43 commercial banks operating in Kenya. The target population composed of the 159 management staff currently employed at the head offices of the various commercial banks in Kenya. The population was composed of Senior, Middle and Junior or Entry level Management staff. A sample of 30% was selected from within each group. Primary data was gathered using questionnaires which were dropped off at the bank’s head offices and picked up later when the respondents had filled the questionnaires.Descriptive analysis was used to analyze quantitative data while content analysis was used to analyse qualitative data.Results: The study concludes that capital adequacy requirement is perceived to be important in commercial banks. The study thus deduces that financial stability, cred...
American Journal of Finance
Purpose: The purpose of the study was to identify challenges facing commercial banks in the implementation of capital adequacy requirement in Basel III framework.Methodology: A descriptive survey design was applied to a population of 43 commercial banks operating in Kenya. The target population composed of the 159 management staff currently employed at the head offices of the various commercial banks in Kenya. The population was composed of Senior, Middle and Junior or Entry level Management staff. A sample of 30% was selected from within each group. Primary data was gathered using questionnaires which were dropped off at the bank’s head offices and picked up later when the respondents had filled the questionnaires. Descriptive analysis was used to analyze quantitative data while content analysis was used to analyze qualitative data.Results: The study concludes that the implementation of Basel III requirement has been faced by various challenges like growth barrier, regulatory const...
American Journal of Finance
Purpose: The purpose of the study was to establish measures commercial banks have taken to ensure compliance with the capital adequacy requirement in Basel III framework.Methodology: A descriptive survey design was applied to a population of 43 commercial banks operating in Kenya. The target population composed of the 159 management staff currently employed at the head offices of the various commercial banks in Kenya. The population was composed of Senior, Middle and Junior or Entry level Management staff. A sample of 30% was selected from within each group. Primary data was gathered using questionnaires which were dropped off at the bank’s head offices and picked up later when the respondents had filled the questionnaires. Descriptive analysis was used to analyze quantitative data while content analysis was used to analyze qualitative data.Results: Based on the findings the study concluded that the commercial banks in Kenya have taken various measures to ensure compliance with capi...
Effects of Capital Adequacy Guidelines on Financial Performance of Commercial Banks in Kenya
Strategic Journal of Business & Change Management, 2023
This study investigated the effect of liquidity management guidelines on financial performance of commercial banks in Kenya. The study used descriptive survey research design. The researcher targeted all 42 commercial banks in and purposively selecting three senior management staff from every bank to arrive at a sample size of 130 respondents that participated in the study. The study collected both primary and secondary data. Structured questionnaires were used to collect primary data. Data collected was quantitative in nature and it was analyzed by factor and descriptive analysis. The descriptive statistical tools such as SPSS version 26 was used to describe the data and determine the extent to which the growth strategies were used and the level of growth achieved. The findings were presented using tables and charts. Tables were used to summarize responses for further analysis and facilitate comparison. The study showed that CBK prudential regulations on capital adequacy affects the banks performance on total deposits.
Strategic Journal of Business & Change Management, 2022
In recent decades; there has been unprecedented number of disruptive banking crises. Financial performance of commercial banks have been challenged over time and this has seen some commercial banks placed under receivership. Between 2019 to 2020, return on assets and return on equity has decreased making financial performance to decline. The main objective was to determine the influence of Capital adequacy requirement on financial Performance of Commercial Banks listed at Nairobi Securities Exchange. The study adopted a descriptive survey research on a population of 12 commercial banks listed at Nairobi Securities Exchange Kenya. This study used secondary data from published Central Bank of Kenya financial reports. The study used stata software version 15 in data analysis. The study data was analyzed by both descriptive statistics and inferential statistics. Results were presented by use of tables. Panel data Pearson Correlation results capital adequacy requirement as P=0.0268 (P<0.05) hence significant. The study hence found that Capital adequacy requirement had positive and significant influence on financial performance of commercial banks listed on the Nairobi Securities Exchange. Therefore bank managers should invest in assets to improve capital base. The study concluded that Capital adequacy requirement was of value in the banking sector and policy guidelines to see them effective being vital. The study recommended that managers of listed commercial banks should find ways of minimizing non performing loans to make bank capital adequate. This study is of help to bank managers in addressing capital adequacy compliance requirement and financial performance of commercial banks.
Effect of Capital on the Financial Performance of Commercial Banks in Kenya
Asian Journal of Business and management, 2016
This study sought to examine the effect of capital on the financial performance of commercial banks in Kenya. The specific objectives of the study were to determine the effects of core capital, subordinate capital and risk weighted capital on the financial performance of commercial banks in Kenya. The study adopted a descriptive research design. The target population was the listed commercial banks in Kenya as licensed by the Central Bank of Kenya as of 2014. The study was based on secondary data retrieved from the banks’ annual audited financial reports spanning 5 years between 2010 and 2014. The study was based on quantitative data. The study findings showed that the core capital to total risk weighted assets for the Tier I banks decreased from year 2010 to year 2014 while that of the Tier II banks decreased from year 2010 to year 2014. The findings also showed that the total capital to total risk weighted assets for the Tier I banks decreased from year 2010 to year 2014 while tha...
IMPLICATIONS OF BASEL III ACCORD ADHERENCE ON FINANCIAL DISTRESS STATUS OF COMMERCIAL BANKS IN KENYA
The study aimed at examining the relationship between adherence to Basel III accord and financial distress status of commercial banks in Kenya. This study adopted a descriptive research design and the population for this study consisted of all the 43 commercial banks in Kenya. The study used secondary data, which was obtained from the listed companies financial statements from 2013-2014. The study used descriptive and inferential statistics to analyze the data. The study findings established that capital requirements, leverage requirements and liquidity requirements have a positive relationship with financial distress status of commercial banks in Kenya hence the Basel III accord requirements positively influence the financial
Extent of Basel II accord adoption and perceived implications on banks' operations in Kenya
Ndimu P.K, 2011
ABSTRACT Basel II framework is based on the 1988 accord’s basic structure of setting capital requirements and builds a firm foundation for capital regulation, supervision and market discipline to enhance prudent risk management to achieve financial stability. The framework better reflects the underlying risks that banks face and provides incentives for risk management. This study sought to examine the extent of Basel II adoption and its perceived implications on commercial banks in Kenya. The study was guided by the following specific objectives: (i) to establish the extent to which Basel II requirements have been adopted by commercial banks in Kenya; and (ii) to determine the perceived implications of Basel II Accord on commercial banks in Kenya. For purposes of this study, a descriptive survey was undertaken. The population was all the commercial banks registered and licensed to undertake commercial banking business in Kenya. The total number of commercial banks stood at 45 as at December, 2009 (CBK, 2009). The respondent from each of the commercial banks was the Chief Executive Officer (CEO) or their designates, who are charged with the responsibility of shaping the strategic direction of their respective organization. The survey method was used to collect data. A semi-structured questionnaire was used to collect primary data from the respondents. The data pertaining to profile of the respondents and their respective organizations was analyzed using content analysis while data pertaining to the objectives of the study was analyzed by employing descriptive statistic. Descriptive statistics were used to describe the basic features of the data in the study. Findings of the study indicate a substantial progress of the Kenyan banking sector as far as Basel II implementation is concerned. The international banks, drawing on the support of their parent groups, are in a better state of adoption compared to local institutions. The findings also show that many banks in Kenya do not rely on External Ratings saves for their international counterparties and large corporate counterparties. This finding is consistent with the limited credit rating penetration in the country. In view of the findings and conclusions, the following recommendations are made for policy and practice: There is limited credit rating penetration in the country. Unrated exposures under the standardized approach would attract higher risk weights and thus more capital would be required to be set aside for such exposures; since Basel II allows for the use of internal models by banks to determine their capital charges pursuant to supervisory approval, a transition period will therefore be required for Kenyan banks to collect the requisite data for the model based approaches to assessing their capital adequacy needs; human resources competencies have been identified as a cross-cutting challenge. Basel II will require banks to upscale their human resource base and a “talent war” in the banking sector can be anticipated going forward; and upgrades and overhauls of existing IT literature systems for most banks will be required. Robust, scalable systems will be required to ensure banks can meet the rigorous Basel II information requirements.
Capital Adequacy and Financial Performance of Tier III Commercial Banks in Kenya
2015). Furthermore, according to Busch et al.,(2015), economic and social objectives are intricately interwoven, making financial performance inexorably related to social goals. Bank capital, asset quality, management potential, income assessment, and liquidity are all CAMEL criteria, according to Bhasin (2016), could be used to calculate a bank's financial performance. CAMEL parameter ratios are also significant to banks' financial performance decisions, according to the author, because greater ratios above the minimal standards indicate that banks' financial performance trends are robust. Banks' ultimate purpose, according to Ongore and Kusa (2013), is to make money, and ROA, ROE, and net interest margin are important performance metrics for assessing banks' financial success. The major financial measures for Kenyan commercial banks in this research will be ROE and ROA. These indicators (ROA and ROE) show financial power, weaknesses, opportunities, and hazards, and they include effectiveness, growth, and even consumer happiness (Fwamba, Nasimiyu and Toroitich, 2020).
International Journal of Science and Research (IJSR) , 2021
Bank failures coupled with declining profitability has been experienced in the Kenyan banking sector for a couple of years. This comes even after the Central Bank of Kenya has made concerted efforts to address the problem by introducing the risk management guidelines in 2005. In its report on the financial performance of the Kenyan banking sector for 2016/2017 financial year, banks profitability recorded a decline compared to the previous year. This situation raises the issue of whether these guidelines have had any effect on enhancing bank performance. The objective of this study was to determine the effect of board and senior management oversight guideline compliance on financial performance of commercial banks in Kenya. This study was guided by the Stakeholder theory and a descriptive research design was used. The study's target population comprised of all the 42 commercial banks licensed by the central bank to operate in Kenya. Sampling was not required since the study adopted a census of all the banks. Both secondary and primary data were used in the study. Primary data was obtained using structured questionnaires while the secondary data was collected from the audited financial reports of the commercial banks. Data analysis was done using both descriptive and inferential statistics with the help of Statistical Package for Social Sciences. The study established that board and senior management oversight guideline was a statistically significant predictor of the financial performance of the Commercial Banks in Kenya (t = 3.722; p = 0.000). The findings of this study can benefit to the Central Bank of Kenya in informing the review of the guidelines, management of commercial banks in making policy decisions and other scholars in the same area of study to provide literature.