Prudential Regulations And Financial Performance Of Commercial Banks In Sierra Leone

The study sought to assess the impact of prudential regulations on financial performance of commercial banks in Sierra Leone. Specifically, the research investigated the effect of liquidity regulation, credit risk regulation, and capital adequacy regulation on commercial banks’ financial performance. An explanatory research design was used with all 14 licensed commercial banks in Sierra Leone targeted for the study population. Secondary data was obtained from audited commercial banks’ financial statements and from the Central Bank of Sierra Leone for 20 years between 2002 and 2022. Panel data was utilized and was then analysed using panel regression and descriptive analysis. The study found liquidity regulation have a positive and insignificant effect on bank`s performance in Sierra Leone. In addition, The study also concludes that Non-performing loans have a negative and insignificant effect on bank`s performance in Sierra Leone. Finally, capital adequacy regulation was also discovered to have a positive and significant effect on bank`s performance in Sierra Leone.The study recommends that policy makers through the central bank of Sierra Leone should review and improve on the liquidity regulation of commercial banks in Sierra Leone. This will in turn facilitate meeting of customers’ withdrawal demands and short term obligations while improving the commercial banks’ financial performance. In addition, managers in commercial banks should ensure that total loans to total deposits ratio remains low as a way of ensuring that their institutions are able to meet monthly obligations.