The study has explored the impact of selected regulatory variables on performances applying a panel regression\non 18 commercial banks in Ethiopia for the period 1999-2015. The variables used in the model are directly derived\nfrom the extant regulatory approach used by the Central Bank to regulate the banking business. The literature review\nalso shows that most of them are enacted in other countries with few exceptions and mainly related to bill purchase\nrequirements. The model constructed, therefore, has established and finds a statistically significant relationship in\nsome of the regulatory variables with performance measures. The most important findings of this study relate to the\nnegative impact of some of the recent policy directions from the regulator on performances. For instance, branch\ngrowth and bill purchases have a statistically significant negative relationship with bank performances. This should\nbe one of the areas requiring policy flexing from the regulatory side in the future. Nevertheless, other policy direction\nsuch as capital growth requirement remains a positive contributor to performances. More specifically, the study\nfinds that exchange rate has a positive and statistically significant relationship with the profit models. Despite the\nbenefit of a depreciating local currency and a stable foreign currency type to shield them from currency fluctuation,\nit allowed banks to earn a ââ?¬Ë?policy profitââ?¬â?¢. The depreciation of Birr permitted banks to enjoy a profit from their foreign\ncurrency holdings in the form of daily asset revaluations. Nevertheless, many of the variables (prudential regulatory\nvariables) used in this study (interest rate, reserve rate, number of new entrant banks, and level of entry capital) are\nnot statistically significant to influence on bank performances.
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