Market Risk Management Within Commercial Banks In Kenya In Response to the 2007-2008 Global Financial Crisis

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Date

2011-05

Journal Title

Journal ISSN

Volume Title

Publisher

Daystar University, School of Business and Economics

Abstract

The market risk management function in most commercial banks involves the continual monitoring of treasury by an independent department called Market risk department or sometimes referred to as Treasury Middle Office. This function is mandated to oversee the operations of treasury and provide independent opinion of the operations within treasury. This study demonstrates the value of appreciating Market Risk Management, incorporating good risk management practices, tools and advanced modelling techniques towards efficient bank management. The purpose of this study was to establish whether local commercial banks had adequate structures and controls for identification, quantification, and reporting market risk especially after the 2007-2008 global financial crisis. It was also important to establish whether reports generated on market risk exposures were delivered to senior management and if they played any significant role in managing market risk. Highlight was also given to the new measures commercial banks felt the regulator could adopt to help manage market risk better in the local banking sector. This study employed descriptive design due to its quantitative nature and statistical analysis that was expected. The population studied was made up of forty-three commercial banks in Kenya but only targeting a sample size of twenty banks. The scope was to focus on market risk management styles in particular adopted by these commercial banks. The data collected from the respondents were coded and analyzed using the SPSS software which gave comparative analysis of the data from the questionnaires. The data was presented using figures and tables. Both qualitative and quantitative techniques were used to analyse closed and open-ended questions respectively. The study reveals that senior management staffs consumed market risk reports generated. It has also revealed that banks appreciate the different management tools in place with a huge majority using them. Many banks have as a result of the 2007-2008 financial crisis put in place better market risk management tools in line with the Basel recommendation or at least thinking of implementing better tools and structures. Some banks on the other hand have suggested that there are still better ways they feel the regulator can take in a bid to manage market risk better. The estimated cost for this study was forty thousand Kenya shillings and took an estimated time of three months.

Description

MASTER OF BUSINESS ADMINISTRATION in Finance

Keywords

market risk management function, most commercial banks, monitoring of treasury, Treasury Middle Office

Citation

Ogada, S. O. (2011). Market Risk Management Within Commercial Banks In Kenya In Response to the 2007-2008 Global Financial Crisis. Daystar University, School of Business and Economics