The impact of the legal reserve ratio on the performance of commercial banks - an analytical study in the Arab Bank of Jordan

Abstract

The policy of the legal reserve of the monetary policy instruments quantitative indirect influence on the performance of commercial banks by the monetary policy pursued by the central bank as to whether the expansion or contraction, so the research on the analysis of the impact of the proportion of the legal reserve on all of the indicators of profitability, liquidity and capital adequacy. and using the annual reports of the Arab Bank for the period (1997 - 2004) was extracted percentages represent indicators of the performance of the Arab Bank was tested significant results using statistical analysis (ANOVA), containing the coefficient of determination (R2) and test (F) and test (T). Based on the results of the analysis was reached (that proportion of the legal reserve significant effect on the two indicators of profitability and capital adequacy, while significant effect on the index and only one of the indicators of liquidity without the other, represented by the liquidity legal). Therefore, the most important recommended by the researcher is (that the Central Bank of Jordan followers of other policy with the policy of the legal reserve ratio such as issuing certificates of deposit, for example, sale of commercial banks to absorb liquidity).