ASSESSMENT ON THE ROLE OF NATIONAL BANK OF ETHIOPIA REGULATIONS ON THE PERFORMANCE OF PRIVATE BANKS: IN THE CASE OF ADDIS INTERNATIONAL BANK SHARE COMPANY

Abstract

The objective of this study was to examine the role of National Bank of Ethiopia regulation on the performance of Addis International Bank Share Company. The study had four specific objectives of assessing how capital requirement, branch expansion, interest rate and reserve requirement affect the performance Addis International Bank S.C. The research examined the relationship between National Bank of Ethiopia regulations and the performance of Addis International Bank S.C. The secondary data collected through structured document i.e annual assembly magazine from 2012 upto 2016 G.C. reviews from the records held by the Addis International Bank S.C.. and analyzed using SPSS. The findings of the study in some areas concur with past studies while in others it contradicts past findings by other scholars. The R square also, called coefficient of determination is 0.669 and adjusted R square is 0.542 indicates that the model can explain 54.2% of the variations in the return on assets of the Addis International Bank S.C. and that there are other factors, which can explain 45.8% of the variations in return on assets (ROA). This shows that the independent variables (capital requirement, reserve requirement, branch expansion and interest rate) of this study have high role to play on the performance of Addis International Bank S.C. Returns on assets (ROA) had the positive correlation with the reserve requirement, capital requirement, branch expansion, interest rate, firm’s size and GDP except inflation rate. Regulation is a key pillar of financial institution operations in Ethiopia and by extension pillar to financial prosperity and stability. Every year banking system contribute to the development of the country, the study recommends the Government of Ethiopia to develop policy which will help banks to operate more in a conducive environment and this can create financial stability of financial institution in the country.