Impact of NBE Purchase of Foreign Regulation on Private Banks Performance
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Date
2021-04
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A.A.U
Abstract
In every economic developmental theory, financial institutions are the center role player. If there is a catastrophe on the operation and administration of the institutes, the adverse impact on GDP of the countries development. The healthy and stable economic flow managed by effective regulation and policy with right application of the stakeholders. One of the main foundations of banking business is the management and resource of foreign currency. The unbalanced foreign trade of import and export has its own shifting force on the economy. This thesis paper focused on the assessment of purchased foreign currency regulation of NBE related with the performance of private banks. The study used balanced panel model and collect non-probability sampling from six private banks covering the period of six (6) consecutive years, 2014-2019. The study used two dependent variables return on asset (ROA) and return on equity (ROE) to measure the performance of the bank and independent variables that are sources of foreign currency, export, remittance, diaspora accounts. To evaluate and to assess their impact on selected banks performance, the governing NBE’s regulations of surrender policy and allocation of foreign currency are the whole center of the research. Explanatory research method used with tabular, graph, and diagram presentation with the data collected interpretation. Through the research 30% surrender policies impact and the stiff competition on purchase of foreign currency added with high scarcity on the market, has negative significant impact on the performance of the bank. The informal black market and current exchange rate has also its own contribution on the scarcity of the foreign currency. Even if bank industry is one of high profitable investment field, still the performance found affected by the above independent variables and the researcher comment on the findings and recommends NBE to revising the regulation of surrender policy by decreasing the percentage or/and by adjusting the exchange rate amount. The other recommendation is the regulatory body to review the floating rating to market led to tackle the informal and illegal bodies.
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Keywords
Surrender, Return on Asset, Return on Equity