Effect of compliance of prudent financial regulation to Kenya's Commercial banks' stability

Abstract

The purpose of the study was to assess the effect of compliance of prudent financial regulation to Kenya's commercial banks' stability. The study sought to address the following research question: Is there any link between the compliance to prudent financial guidelines and domestic bank stability and will the link be stable over time. The populations for this research are the 43 listed Commercial Banks in Kenya analyzed for a period from 2011-2015. The study found that commercial banks risk weighted assets had increased by 24.12% over the years indicating a similar growth in bank's assets. To meet the asset growth, core capital also increased by 14.761% with bank's undertaking rights issue in 2011 in order to meet the new capital requirements (CBK, 2015). The CAMEL rating also showed continuous growth in all the key ratios over the years as shown in the previous chapter. Capital structure is also seen to remain stable over the years. The study concludes that the financial statutory requirements have a clear impact on banks' stability