Effect of Central Bank Regulations on Financial Performance of Commercial Banks in Rwanda

Abstract

The thesis main goal is to look at the effect of central bank regulations on financial institution performance in Rwanda using a case study of commercial banks in Rwanda. The research focused on audited financial statements of six commercial banks in Rwanda, the sample was chosen on basis of age, share capital, assets bank holds, youngest bank, oldest bank, foreign bank as this will support vivid results on the study. The study used quantitative method of data collection. Data were collected using financial statements and processed using financial ratios. Correlation and regression analyses were used to establish the relationship between effects of central bank on performance of financial institutions. Findings were revealed positive linear relationship between central bank regulations on performance of central bank regulations. The thesis had both academic and policy implications. It provides a deep understanding of central bank regulations, aspect of the literature that has not been given important attention as most studies have a bias on banks. Several previous researches have been conducted with the same variables “central regulation on performance of banks” even though the variables that have been used are the same. Therefore, it is with this consideration that present study intended to focus more on central bank regulations on the performance of financial institutions. Consequently, this research will provide empirical data related to the studied variables “central bank regulations and performance of financial institutions”. This will contribute to the academic literature, further theoretical and empirical developments related to the central bank regulations mainly. The researcher recommended that banks completely comply with all stipulated regulations, and that the Central Bank ensure that all banks do so. Commercial banks should be adequately capitalized in order to fulfill their mandates the advertisement. The Central Bank of Rwanda should effectively control how commercial banks handle their liquidity so that a healthy banking climate can be created. Banks should implement appropriate risk management strategies that help them manage credit adequately so that the amount of non-performing loans can be reduced.