Effect of Treasury Single Account on the Financial Performance of Commercial Banks in Tanzania.

Abstract

This study aims at investigating the effect of Treasury Single Account (TSA) on the financial performance of commercial banks in Tanzania. The study more specifically has been guided by three objectives which are, to assess the impact of TSA on capital adequacy position of the commercial bank, to analyze the contribution of TSA on the profitability of commercial bank, to examine the effects of TSA on the liquidity position of the commercial banks and to identify how TSA implementation affects the earning capacity of the commercial banks. The study was quantitative in nature and was descriptive, analytical and empirical in nature and was executed using the published audited financial statements of banks. The study used secondary data obtained by reviewing relevant audited financial statements. Data collected from financial reports were analyzed statistically by using the Microsoft excel by computing CAMEL rating of selected CAMEL components of this study. The main findings presented the average capital adequacy before TSA implementation for EXIM bank was 12.0% to 19.0% in the year 2011 to 2017 respectively and after TSA implementation which was 15% to 11.3% in the year 2018 to 2020 respectively, which also was above the Bank of Tanzania requirements of at least 10%. Based on CAMEL rating system, in both banks the management efficiency is above 50% of its operations before and after TSA implementation. From the findings of this study NMB bank has a composite rating of 1 in ROE which denotes soundness and strongest financial performance of the bank. But CRDB and Exim bank have a composite rating of 3 ROE, at this position banks shows that the bank has weaknesses in different component areas. This study contributes to current knowledge by showing the effect of Treasury Single Account (TSA) on the financial performance of ommercial banks in Tanzania. In addition, this study provides insights of CAMEL rating as the supervisory and regulatory rating system for evaluating the financial performance of commercial banks in Tanzania before and after TSA implementation.