ABSTRACT
Banking Industry reforms was intended to improve so many indices in the
banking industry. Some of the indices as affected were; poor capitalization,
inefficiency and negligence, loss of depositor’s fund, poor management, poor
staffing, fraudulent practices, Bank Liquidation, High interest rate, Heavy
debts Loan racketeering and Little/no attraction to investment. The magnitude
of improvement of the current indices and the former indices before the reforms
are not the same. The research sought to discern on the nature of change in the
indices after the reforms. The topic: The perceived impact of the Central Bank
of Nigeria banking reforms on Commercial banks in meant to expose what these
reforms has done in the Nigerian Commercial banks and why it is necessary.
It was observed that there had been a success in the performance and the
activities of the commercial banks after these reforms. Having examined the
above topic and identified the problems and prospects, recommendations were
made to prove to these commercial banks that have been reluctant in accepting
these reforms to accept it in good faith for its good interest to the economy.
CHAPTER
ONE
1.0 INTRODUCTION
The Nigerian banking sector witnessed dramatic growth
post-consolidation. However, neither the industry nor the regulators were
sufficiently prepared to sustain and monitors the sector’s explosive growth
prevailing sentiment and economic orthodoxy all encouraged this rapid growth,
creating a blind spot to the risk building up in the system.
Prior to the crisis, the sentiment in the
industry was that the banking sector was sound and growth should be encouraged.
The IMF endorsed the strength of the banking system to support this growth.
However, this sentiment proved misplaced. I believe 8 main interdependent
factors led to the creation of an extremely fragile financial system that was
tipped into crisis by the global financial crisis and recession.
These 8 factors were:
1.
Macro-economic instability caused by large
and sudden capital inflows.
2.
Major failures incorporate government at
banks
3.
Lack of investor and consumer
sophistication
4.
Inadequate disclosure and transparency
about financial position of banks.
5.
Critical gaps in regulatory framework and
regulations.
6.
Uneven supervision and enforcement
7.
Unstructured governance and management
processes at the CBN/weakness within the CBN.
8.
Weaknesses in the business environment.
Each of these factors is serious on its own right. Acted together they brought
the entire Nigerian financial system to the
brink
of collapse.
1.1 BACKGROUND
OF THE STUDY
Banking
regulation was first introduced in Nigeria in the early 1950s in response to
the failure of local banks.
The
1952 Banking ordinance imposed minimum requirements for paid up capital and the
establishment of reserve funds. This was followed by the enactment of the 1958 Central
Bank act and the Banking ordinance of 1959. The banking legislation was further
strengthened with the enactment of the banking decree of 1969.
Reform is an Amendment of laws to
accommodate new development that the already existing regulation can no longer
curtail. In other words, there cannot be reforms without regulators.
Regulation means an official rule by a
government or some other authority.
Better still, Regulation means that rules
are established to guide the activities of the people in order to maintain
standard and if not kept, someone should be sanctioned.
Whereas, reform simply means to improve a
system, or a law by making changes to it,
it is very important to note that the central bank of Nigeria which was
established to regulate the activities of these commercial banks cannot conveniently
do so without improving on their regulations. In other words regulation is dynamics,
thus reforms are of necessity.
The need for these reforms was as a result
of inefficiency and negligence, poor capitalization, poor staffing poor
management and bank liquidation.
When these banks are finally liquidated, it
is not just these banks and their staff that are affected, but also the
Depositors, the shareholders, the government and the general public.
When such is the case, solution is almost
not available thus prevention is better than cure.
This is the reason why the Central Bank of
Nigeria has ensured that these banks are well capitalized and of recent that no
commercial bank will be allowed to fail.
This has shown why these reforms are very
important in the banking industry, if not for other important services that
they do render, at least for the safety of depositors fund....
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