ABSTRACT
In recent times,
instability in the financial system and the banking sector in particular has
risen from institutional failures in the past. In Nigeria, the lesson of the
earlier bank failures appeared to have been forgotten as generalized distress
swept the banking sub-sector and systematic distress gripped the finance house
sub-sector. This research work assesses the banking regulations with respect to
banking distress phenomenon and empirical analysis on the extent of failures in
the baking industry as well as the major causes.
The statement of the
problem identified and categorized the banking distress into two major types;
the generalized nature and the systematic. Generalized nature focuses on, when
the distress has effect on the industry as a whole, while the systematic
concerns only when the distress has effect on the supervisory/regulatory
authorities.
Conversely, the
researcher was poised to establishing a research design which was instituted to
meet the aim of the study. The area of the study was specifically for financial
institutions and regulatory authorities within the Enugu state. The researcher
did employ both primary and secondary sources of data generation, while questionnaire and personal
interviews were also used as an instrument for data collection. He also draw
some comparison between the figures adopted from the field survey tabulated
during data analysis and figures gotten from both Central Bank of Nigeria
annual report for year 2007 and also Nigeria Deposit Insurance Corporation
annual report for year 2007 respectively. The researcher also employed chi-square
for hypothesis testing.
Basically, from the
analysis of data, it was established that the following finding were observed:
·
Even during regulation and deregulation, bank
distress still exists.
·
Ownership structures and power-tussle among
management directors and managers contributes to bank’s failure.
Incidence of fraud and forgeries among bankers’ staff, also is a
contributing factor for bank distress.
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Regulation is a form of
intervention in any activity, ranging from explicit legal control, to peer
group control. It also a restriction placed by an authority with intention of
achieving a particular goal. Basically, there are major theories of regulation.
Prof. Uche (2008) went on to categorize it into two:
(1)
Public Interest theory; it states that regulation is essentially used to
correct inequitable market prices. For any regulation to sustain and strive
well, it must have the support from the regulatees
(2)
Capture theory of regulation; though regulation
may be well set out the interest of the people, but it will then be captured by
the regulatees. The industries are organized, and have all the necessary
resources to influence the policy of the
government and even that of the public. Therefore, the regulation which set out
to serve the interest of the general public, may end up serving the interest of
the regulates.
Although, the researcher
is not going into details on argument that arises among scholars on the issue
of regulation. The debate is normally “on whose interest do regulation protect,
is it the general public or the regulates?
Conversely, due to the
nature of business bank’s operates and the prominent role they play in any
given economy, Odita (2006:1) stated that it ranges from the traditional role
of custodian of money; the government therefore, need to give the depositors of
fund and other potential/intending investors the confidence in the affairs of
financial institution (Banking Industry). This gave rise for the industry to be
closely monitored, and directed as accordingly by the regulatory authorities.
The objective of supervision is to promote the safety and soundness of
financial institutions through on-going evaluation and monitoring, including
the assessment of risk management system, financial condition and compliance
with laws and regulations.
Invariably, in Nigeria financial
sector, there are three principal legislations that provide the legislative
framework for the regulation of banks in Nigeria. These are; The Central Bank
of Nigeria Act (CBNA), The Bank and other financial Institution Act (BOFIA) and
The Nigeria Deposit Insurance Corporation Act (NDICA). Banking regulation, as
it is also obtainable in other countries in the globe, is concerned primarily
with the protection of depositors and the stability of financial system. The
prudential guidelines to banks also comprise among
However, banking
regulations is a topical issue which covers a wide range of operation of banks
in Nigeria, several banking regulations have been put in place, dating from
1952 till date. These regulations are contained in the form of ordinances. The
introduction of banking ordinance in 1952, which triggered a rapid growth in
the industry with the growth, also witness a disappointment where many banks
there after went into distress. Other ordinances that followed the 1952 bank of
ordinance are: (a) The Banking Act of 1958; (b) The Central Bank of Nigeria Act
of 1958; which was later amended in 1979; (c) the Central Bank of Nigeria
decree of 1991, (d) Banks and other financial institutions Decree of 1991 and
other Central Banks’ of Nigeria monetary guidelines published at the
commencement of every fiscal year.
Although, in the amidst of all these banking regulations, the Nigeria
Banking industry did not cease to witness banking instability and banks’
distress Dr. Sani (2003:4) stated that between 1947 - 1952 twenty one (21)
banks failed, between 1953-1945 also seventeen (17) banks also failed, in the
mid 1990, thirty four (34) bank also failed too.....
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Item Type: Project Material | Attribute: 117 pages | Chapters: 1-5
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