Implications of financial institutions regulations on assets and liabilities management in depository financial institutions in Tanzania

Financial sector reforms in Tanzania had posed a number of challenges to the banks and non bank financial institutions (NBFIs) particularly on assets and liabilities management. In line with the reforms are the regulations issued by the Bank of Tanzania as guidelines to maintain an efficient and sound financial system. The regulations pose a challenge to banks and NBFIs in their assets and liabilities management since apart from profit seeking; they also need to comply with the regulations. Financial institutions (Fls) need to appropriately manage the assets and liabilities as profitably as possible within the regulatory benchmarks. Mismatch between the assets and liabilities in Fls make the firms to experience low profitability and a financial distress which results to bank failure. This study was designed to analyze the impact of Fls regulations on the assets and liabilities management in banks and NBFIs in Tanzania. The study has used both primary and secondary data. Interviews were made to the senior officials of banks and NBFIs as well as to the stakeholders of the financial sector. The results show that significant importance is given by the top management in assets and liabilities management function. They also reveal that there is a-positive influence of regulations on the composition of assets and liabilities. However, the current Fls regulations promote efficient utilization of assets and liabilities in the Fls. The critical regulations and the general laws in implementation of assets and liabilities management were identified. The study gives an insight for future policy making to the government. Bank of Tanzania should review the regulations to reflect the changing financial sector environment. Fls should follow the guideline issued by Bank of Tanzania and other global bodies on effective management of assets and liabilities such as Basle Committee, and providing capacity building to their members of ALCO.