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An Analysis of the Impact of Minimum Capital Requirements on Commercial Bank Performance in Zimbabwe

Keywords: Bank capitalization , bank performance , commercial bank.

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Abstract:

The research sought to determine the role of capital on commercial bank performance in Zimbabwe. Descriptive correlation method was used in this research and the population includes senior commercial bank performance. Twenty executives were selected from each of the chosen banks and interviewed on various issues pertaining to bank capitalization and performance. This was augmented by some regression analysis to determine the magnitude of effect of capital on performance of selected banks. The banks were grouped into strata which were classified as undercapitalized, fairly capitalized and well capitalized as determined by the country’s central bank’s minimum capital levels of US$12.5 million for commercial banks. Findings revealed that there is a significant and positive relationship between commercial bank capitalization and its performance. The findings of this research cannot be generalized to all financial intermediaries let alone all companies since it had narrowed down to commercial banks. The research managed to elaborate on the relationship between capital levels and bank performance as well as the importance of capital to other bank operations. Other factors affecting bank performances were only highlighted, thus other studies can carried out which looks at those factors in detail for example the impact of internal control systems on bank stability and performance as well as the role played by non-interest income to overall bank profitability.

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