The Anaylysis of the impact of exchange rate. flactuations and Risk Management on bank perfomance · Electronic Theses and Dissertations

Author

Zhou, Evidence.

Title

The Anaylysis of the impact of exchange rate. flactuations and Risk Management on bank perfomance

Abstract

In an international trade involve different currencies; the variability of foreign exchange rates are a potentially sensitive factor that control the level of profitability of commercial banks as it impacts their financial intermediation process. Fluctuations in exchange rate may be a source of risk to an organization. Huge losses in foreign exchanges may result to organizations failures in addition to instigating enormous burdens on profitability of an organization. In Zimbabwe exchange rate variations have been characterized with periods of rapid depreciation of the domestic currency Zimbabwean dollar against USD and other strong currencies. The study aimed at investigating the effects of exchange rate fluctuations on financial performance of commercial banks in Harare CBD. The study reviewed theoretical and empirical studies on exchange rate and financial performance. The study adopted a descriptive survey. The study adopted correlation analysis to explain the association between ROA, inflation rates, interest rates spread, bank size and exchange rates. linear regression model was employed. Return on assets was the dependent variables and exchange fluctuations variables as the independent. The study concluded that the inflation rates have been increasing yearly over the entire study period. The relationship however between inflation and returns on assets was negative and hence it negatively impacted performance. The study concluded that interest rates especially lending rates have been increasing over time whereas the same observation was not eminent in deposit rates by banks. The study therefore concludes that the interest rates spread has been increasing in the recent years since borrowing had become expensive thus profitable whereas deposits rates were very small. The study recommended relevant authorities for instance. The RBZ should adequately put measures to safeguard the value of the domestic currency and reduces the risk. This would ensure a slight fluctuation of the current against other currencies.

Date

June 2022

Publisher

BUSE

Keywords

Flactuations,

Exchange Rate,

Risk Management ,

Supervisor

Dr. S Mhazo,