Assessment of Financial Stability among Commercial Banks in Kenya: An Evidence of Fragility Index Measure

Nathan Wamalwa Wafula, John Mungai and Daniel Makori
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Nathan Wamalwa Wafula: Accounting and Finance Department, School of Business, Kenyatta University, Nairobi, Kenya.
John Mungai: Accounting and Finance Department, School of Business, Kenyatta University, Nairobi, Kenya.
Daniel Makori: Accounting and Finance Department, School of Business, Kenyatta University, Nairobi, Kenya.

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Abstract: Fluctuations rate of the fragility index were characterized by the increasing rates of non-performing loans in commercial banks, bank runs among the commercial banks and increase in foreign liabilities from commercial banks in Kenya. The study was carried out between years 2011 to 2018. Evidently, there was a sharp increase and fluctuation in the fragility index from the end of 2014 and the beginning of 2015 to 2018; it was within this period that Dubai Bank, Chase Bank and Imperial Bank were put under receivership. Fragility index in this study has emerged to be a robust measure of early warning signal to financial stability of commercial banks in Kenya. The study recommends that going forward, fragile commercial banks should divest a way towards merging to ensure they are financially stable.

Date: 2022-03-12
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Published in Asian Journal of Economics, Finance and Management , 2022, 4 (1), pp.182-189

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