Abstract

The study examined the impact of prudential guidelines on the financial performance of Nigerian quoted deposit money banks (DMBs) from 2010 to 2022. The prudential regulations are proxied by capital adequacy, asset quality, management efficiency, earnings, liquidity, and sensitivity to market as independent variables. In contrast, financial performance is proxied by return on equity, return on assets, and profit after tax as the dependent variable. The data was sourced from the annual reports of the thirteen quoted deposit money banks and analysed using descriptive statistics and panel data regression. Pearson Correlation was employed to evaluate the degree of relationship among variables and the extent of linearity, and the Hausman test was used to determine whether to use fixed or random effect panel least square regression, of which the random effect model was favoured. Findings from the study reflect that capital adequacy ratio (CAR), asset quality ratio (AQR), and sensitivity to market risk (SMR) did not demonstrate significant effects on any of the financial performance metrics (ROA, ROE, PAT). Management efficiency ratio (MER) significantly affected ROA and PAT. Additionally, the earnings ratio (ER) exhibited a significant effect on ROA and PAT. However, the liquidity ratio (LR) only showed a significant effect on ROA, but not on return on equity (ROE) or profit after tax (PAT). Among the recommendations is that DMBs should have a long-term, business-oriented approach to capital management that harmonizes with regulatory obligations.