DISTRESS IN BANKING SECTOR HOW TO AVERT FUTURE OCCURRENCE

ABSTRACT

This study is based on x – raying financial distress in the banking sector, the apex transaction boot of our economy.

It is however interesting to note that this study not only would expose also would examine the various mechanism that have been put in place, mostly and especially in the sector, for the handling of thesis may harm in our banking industry and economy.

In this context, this study is expected to help other financial house of the Nigeria economy or the managerial cadre and government enforced discipline and strict measure to culprits and defaulters in the industry and this would enhance proper operation and healthy growth of the industry and economy.

Secondary data instrument are mainly use by the researcher. The findings were made based on the data collected.

It was discovered that poor financial planning weak control and supervising measures, lack of accounting database and government adverse policies or reforms were main cause of financial distress etc.

The findings also revealed that the high rate of unqualified personal and indiscipline contributed greatly to this concept.

In light of above findings, the researcher made some necessary and useful recommendation that if government and financial banking management adhere to would help to arrest and foster rapid growth and increase profit maximization to the banking sector and boost our economic and economy position.   

TABLE OF CONTENT

CHAPER ONE

Introduction

1.1              Statement of the problem

1.2              Reasons of the study

1.3              Significance of the study

1.4              Definition of terms

CHAPTER TWO

Review of related literature

2.1              Distress in the Nigeria banking industry

2.2              What constitute banks distress                

2.3              The causes of banks distress

2.4              How to avert future occurrences of distress

CHAPTER THREE

Hypothesis methodology sources of data and limitation of study

3.1              Hypothesis

3.2              Methodology of study

3.3              Sources of data

3.4              Limitation of study

CHAPTER FOUR

Presentation of data, analysis of data and discussion of results

4.1              Data presentation

4.2              Analysis of data

4.3              Discussion of the result of the analysis   

CHAPTER FIVE

Summary, conclusion and recommendation

5.1              Summary

5.2              Conclusion                                           

5.3              Recommendation  

5.4              Suggestion for further  studies  

Bibliography                                                                                                                              

CHAPTER ONE

INTRODUCTION

1.1              STATEMENT OF THE PROBLEM

The Nigeria banking industry, the issue of financial misappropriation and management is no more stories but some thing that is condemned by the society.

            Stress in the financial sector mainly banking has led to a great loss and economic degeneration due to lack of proper guideline and set standard in the industry (Ebihodaghe (1994) to this effect, the economy has suffered drastically in the recent time, this problem has cause and created so many hardship to the bank and their shareholders, Bellow (1993) most of the distressed bank in Nigeria suffered from fraud, lack of organization and managerial powers and proficiency. This also contributed significantly to the liquidation of some banks. The big question is how fine will our banking industry grow with the rate of the phenomenon” distress?

            The problem of this study now centers on, how to prevent distress in Nigeria banking industry so that the economy can grow and develop  

1.2              RATIONALE OF THE STUDY

Talking about the reason of the study it has to do with bank operation and the failure distress of the sector and also it will be necessary find out the causes of bank failure and suggesting ways of averting future occurrence with acceptable and efficient strategies.                                                         

1.3              SIGNIFICANCE OF THE STUDY

Significance of the study is to tell how benefit it is go to be. Those who will benefit from this study include

Bank

            It will help the banks to operate with profitability; credibility and playing the role of banking intermediation effectively and efficiently.

Industry

            However it help the industries in putting them operation whether daily or number distribution of events in the institution (bank) and how to prevent them future occurrence  

1.4              BACKGROUND OF THE STUDY

Banks are regarded as an indispensable element in the development and growth of any economy. The success  or otherwise of the banking sector is a parameter on which economic activities are measured. It is against this background that it is stated that a healthy banking system is a sign of good health of the entire economy. Distress has far reaching consequences on the economy of the country some of the implications are discussed here under:

v  The situation lead to deposit run this is the withdrawal of deposit by customers from the distress banks. It affects adversely the liquidity and earning capacity of the banks and consequently resulting to decline in availability of ingestible funds in the economy

v  Secondly, bank distress lead to increase in interest rates as depositors ask for higher rates of return for perceived higher chances of bank failure and consequent risk of financial loss.

v  Bank distress cause unemployment through retrenchment of workers in the distressed banks. This has adverse consequences of the retrench staff. It leads to fall in aggregate demand and consequently a reduction in the product win level.

v  Bank distress in the long run may degenerate into bank failure and loss of depositor funds. The maximum amount refundable to each account holder under the NDIC cover for failed banks is #50.000.00 irrespective of the value of deposit.

v  Further, it leads to decline in foreign investment in the country. Due to fear of uncertain investment climate come foreign investors may prefer to close their account with the distressed banks and transfer their funds to other countries with more stable investment atmosphere.  

1.5              DEFINITION OF TERMS

In this study, the definition of terms could go through the topic to how the meaning of the topic of the project “ distress in the banking sector how to avert future occurrence, audit, prevent, banks, distress, economy, guideline, liquidity, portfolio, practice, commercial banks, community banks, merchant bank and deregulation.                                                     

Audit

            Official check and analysis of account by an expert

Prevent

            A measure aimed to prevent or turn away a consequence of an activity

Banks

            Is an institution where keeping of money and leading on issue of credit and loans is obtained

Distress

            An array activity, action or event that brings great sorrow or pain

Economy

            Community system of using its resource to produce wealth, state of a country prosperity

Guideline

             A set of advice to follow low down procedure of rules                               

Liquidity

            The measure or mean of being to change asset into cash (liquid cash)

Portfolio

             This can be defined in financial as collection of share distribution in term of loan and advance, on sectorally even

Practice

             This is putting operation whether daily or routine distribution of event in the instruction (banks)

Merchant bank

             Are financial institution, established by law to provide and to engage in wholesale banking, medium and long term financing equipment and long term financing equipment leasing debt. Factoring: investment management etc.

Community banks

             This is self sustaining financial institution owned and managed by a community or group of communities for the purpose of providing credit deposit and other financial services

Commercial bank

             Is institution who collect or institution establish by law to perform some function which include deposit, acceptance, agency service, bailment, funding, transfer and executorships function.