Abstract
This study examines the relationship between central bank supervision stringency and bank stability in Tanzania, focusing on 45 licensed banks. Specifically, it assesses the influence of regulatory capital stringency, loan loss provisioning stringency, and loan diversification stringency on bank stability. Guided by Agency Theory and Credit Risk Management Theory, the study adopts a quantitative research design. Primary data were collected using structured questionnaires administered to 225 bank employees, including credit, finance, internal audit, risk, compliance, and human resource officers. Data were analyzed using Structural Equation Modelling (PLS-SEM) via SmartPLS 4.0. Rigorous data screening addressed missing values, outliers, and measurement errors. Confirmatory Factor Analysis confirmed adequate model fit, construct validity, and reliability, with factor loadings exceeding the recommended threshold. The results reveal statistically significant relationships between supervisory stringency measures and bank stability, highlighting the critical role of stringent central bank supervision in enhancing financial system resilience in Tanzania.
Recommended Citation
Eliufoo, Sara and King'ori, Judika
(2025)
"The Central Bank Supervision Stringency on Bank Stability,"
Tanzanian Economic Review: Vol. 15:
Iss.
2, Article 2.
DOI: 10.65085/2507-7740/1041
Available at:
https://commons.udsm.ac.tz/ter/vol15/iss2/2