Prudential Regulation and Bank Profitability in the Central African Economic and Monetary Community (CEMAC)

Abstract

The situation of banking activity prior to the major financial reforms of 1993 highlighted the appropriateness of prudential regulation (Avom and Eyeffa. 2007). This study aims to measure the impact of banking regulations on the profitability of commercial banks in the CEMAC zone. More specifically, the aim is to assess the extent to which prudential regulations improve the profitability of banks in the sub-region. To this end, we adopt a multiple regression model based on the method of generalized moments in system following the economic and financial data extracted from the entire banking system during the period 2003-2015 in accordance with the work conducted by Kahane (1977). Our results indicate that compliance with the minimum capital requirement has a positive relationship with bank profitability over the period studied. However, if the banking sector has now regained its solvency, it is important to strengthen the supervisory system by means of independent regulation.