Effects of central bank regulations on the performance of the commercial banks in Tanzania
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Mzumbe University
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A Dissertation Submitted in Partial Fulfillment of the Requirements for the
Degree of Business Administration in Corporate Management (MBA-CM) of
Mzumbe University
Effects of Central Bank Regulations on performances of commercial banks in Tanzania: empirical study on commercial banks in Tanzania. The main objective of the study is to establish the relationship between regulation and financial performance of commercial banks in Tanzania. With three bank specific variables establishing of how operational efficiency, required reserve and capital adequacy affect the commercial banks performance In Tanzania. It used published audited financial statements from eight sampled banks out of 37 commercial banks in Tanzania for the period from 2011 to 2018 thus panel data was used. Endogeneity problem was observed among variables and thus made the researcher to use the Generalized least square method to solve the endogeneity problem. From the results, it was seen that operating efficiency was the only regulatory variable that effected the performance of the commercial banks in Tanzania with the corresponding coefficient of (-4.201). The study propose that regulations can be easily complied by the large banks because these banks have large amount of capital which makes it possible for them to improve their operating efficiency. Also, the available capital gives them a wider room for business improvement, for example in advertisements and wider range of products that they provide. Other regulatory variable such as required reserve and capital adequacy were statistical insignificant. In this study it was indicated that operating efficiency influenced the performance of the banks in Tanzania. To be specific, regulations that boost the efficiency of the bank have effect on the performance of the commercial banks. This suggests that in the matter of time large banks have been able to undertake its economies of scale and result to increase of their capital by attaining the advanced technology that they use in their operations, failure prevention and to see that regulatory requirement are met. Therefore the Central Bank is required to be vigilant in monitoring commercial banks.
Effects of Central Bank Regulations on performances of commercial banks in Tanzania: empirical study on commercial banks in Tanzania. The main objective of the study is to establish the relationship between regulation and financial performance of commercial banks in Tanzania. With three bank specific variables establishing of how operational efficiency, required reserve and capital adequacy affect the commercial banks performance In Tanzania. It used published audited financial statements from eight sampled banks out of 37 commercial banks in Tanzania for the period from 2011 to 2018 thus panel data was used. Endogeneity problem was observed among variables and thus made the researcher to use the Generalized least square method to solve the endogeneity problem. From the results, it was seen that operating efficiency was the only regulatory variable that effected the performance of the commercial banks in Tanzania with the corresponding coefficient of (-4.201). The study propose that regulations can be easily complied by the large banks because these banks have large amount of capital which makes it possible for them to improve their operating efficiency. Also, the available capital gives them a wider room for business improvement, for example in advertisements and wider range of products that they provide. Other regulatory variable such as required reserve and capital adequacy were statistical insignificant. In this study it was indicated that operating efficiency influenced the performance of the banks in Tanzania. To be specific, regulations that boost the efficiency of the bank have effect on the performance of the commercial banks. This suggests that in the matter of time large banks have been able to undertake its economies of scale and result to increase of their capital by attaining the advanced technology that they use in their operations, failure prevention and to see that regulatory requirement are met. Therefore the Central Bank is required to be vigilant in monitoring commercial banks.
Keywords
Central Bank Regulations, Commercial Banks in Tanzania