The Impact of Interest Rate Risk on the Profitability of Banks in Ghana Case Study of CAL Bank

The Impact of Interest Rate Risk on the Profitability of Banks in Ghana Case Study of CAL Bank

Abdoulaye Diallo

This study aimed to examine the impact of interest rate risk on the profitability of Banks in Ghana. The specific objectives of this were to assess the interest rate risk management practices of CAL Bank, to examine the relationship between the interest rate and the profitability and to examine the factors that influence the interest rate of CAL Bank. This study used the quantitative method and forty-eight (48) responses out of fifty-five (55) were collected from the primary data which was the questionnaire and another data were collected from the secondary data which was the annual report of CAL Bank from 2013-2017. Microsoft Excel 2016 and Statistical Practice for Social and Science (SPSS) V.23 were used to analyse the findings. The results revealed that CAL Bank had an interest rate risk management system which was set by the Asset and Liability Committee (ALCO) and used by the Risk Manager to monitor and controls the risk related to their interest rate in their day-to-day operations. Moreover, there was a positive relationship between the interest rate and the profitability and finally, the results concluded that the interest rate of other banks was the key factor that influenced CAL Bank’s interest rate. The study recommended that the (ALCO) and the Risk Managers should meet monthly instead of annually, since the interest rate risk management system is monitored and controlled by the risk manager in their day-to day operations and the profit made by the bank was related to its interest rate. Finally, the study outlined a topic for further researches which was based on “the examination of the credit risk management on the profitability of CAL Bank” in order to make more profit by minimizing the risk involved and to reduce the non-performing loans.

MBA Finance

May 2018