Access to Interbank Market Liquidity:Does Bank Concentration Matter?

Author(s)

Gilbert Kyongo Mutinda , Charles Ombuki , Josphat Mboya Kiweu ,

Download Full PDF Pages: 15-24 | Views: 578 | Downloads: 155 | DOI: 10.5281/zenodo.3948203

Volume 9 - June 2020 (06)

Abstract

Commercial bank’s access to liquidity is the fulcrum which guarantees their very continued survival and existence. However, some banks in Kenya experience difficulty getting sufficient liquidity from the interbank market to resolve their problems of liquidity which can lead to their reduced levels of profitability, freezing of giving loans to their borrowing customers, downsizing or even closure. This study adopted pragmatism philosophical approach to assess the effect that bank concentration has on access to interbank market liquidity in Kenya. The study was anchored on credit access theory, financial intermediation theory and lendable funds theory. The study collected secondary data from the top five commercial banks in terms of market share of total bank assets which operated in Kenya between 2009 and 2018. The data was obtained from the Central bank of Kenya annual bank supervision reports and from each of the 40 individual bank’s annual financial and balance sheet published reports. Data was analyzed using fixed multiple regression model. The findings of the study showed that bank concentration had a positive but insignificant influence on access to interbank market liquidity by commercial banks in Kenya .The study recommended that bank managers should thus endeavor to grow their banks market share for easy access to interbank market liquidity and that policymakers should put in place policies which encourage bank consolidation.

Keywords

Interbank market, Access to liquidity, Bank liquidity, Bank Concentration, Market power

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