+234 813 0686 500
+234 809 3423 853
info@grossarchive.com

The Impact of Bank Distress on Commercial Banks

  • Type:Project
  • Pages:45
  • Format:Microsoft Word
(Banking and Finance Project Topics & Materials)

BACKGROUND OF THE STUDY

In any modern economy, the efficient production and exchange of goods and services requires money and bank is the instrument for affecting it. The last few years have been both traumatic and revolutionary for the banking industry. The industry produced the largest number of technically insolvent and under capitalized banks. The magnitude of distress in the nation’s banking industry reached on unprecedented level making it an issue of concern to the government, the regulatory authority, the bankers and the general public.

The Nigeria banking scene was characterized by changes designed to promote banking in the country. The changes may be categorized into phases, but due to the nature of work, we will consider tow phase namely; the era of laissez – fair banking (1834 – 1952), the era of limited was monopolized by foreign banks, principally the African banking corporation which was the precursor of the (BBWA) British bank for West African the present First Bank of Nigeria, the Barclays bank DCO (Dominion Colonial and Overseas) the present day Union Banks, and the British and French Bank, the for – runner of present United Bank of Africa. Although, discrimination against Nigerians by these banks led to the establishment of some indigenous banks which unfortunately offers litter or no competition to the foreign banks essentially because of their weak capital base or poor managerial capacity. Consequently, all but three to the indigenous banks failed. The survived includes the National Bank of Nigeria established in 1933, the Agbonmagbe Bank (now Wema Bank) established 1945 and the African Continental Bank 1947.

A commission of inquiry headed by G.D. patron set up in 1948 to investigate the business of banking in Nigeria. Their report led to the enactment of the first banking legislation in Nigeria, the banking ordinance of 1952. The 1952 ordinance laid down the standard and procedure for the conduct of banking business by prescribing the mandatory minimum capital requirement for the banks both expatiates and indigenous regulations to Ʃ100, 000 and Ʃ12,500 respectively and it is also introduced regulations to check bank failure. However, the entire indigenous bank established in the country during this period also all failed. The bank failures of this era were attributed largely to the monopolistic structure of the banking industry, which allowed the foreign banks to enjoy exclusive patronage form British firms. The indigenous banks that survived were able to make it because of the support they got from their state government.

The distress phenomenon in Nigeria banking industry is of recent origin. The manifestation became discernable with some policy shocks staring 1988 with Central bank of Nigeria (CBN) directive to banks that naira backing for foreign exchange application be lodged with CBN. This was followed in 1989 by another directive requiring public sector deposits to be transferred to CBN. These two directives exposed the precious liquidity position of some banks and the distress they have subterraneous harbored. What was thought to be a temporary liquidity problem for few banks soon catches up with a lot more banks.

It is important to stress in this work that banking system was already in distress by the time NDIC was established. By them, 7 (seven) banks were known to be technically insolvent. The government at that time, did not embark upon a clearing exercise that would have removed from the system that distressed institutions because it was feared that such an action would lead to loss of public confidence and flight of foreign capital more so there was no deposit insurance institution to expeditiously manage such bank closures. The NDIC was nevertheless required to insure all banks. That means that the corporation has been involved in managing distressed banks even before it could settle down and minister enough resources for this important task.

The intermediating role of banks and their relevance both in the transmission of monetary policies and in the payment system underscore their importance as well as the problem that bank distress at the prevailing dimension in our economy could precipitate. Arising from their intermediation, banks generate financial resources and put these at the disposal of deficit economic growth in the form of increased output. Therefore, an industry wide insolvency of banks, such as the one experienced in Nigeria, should be expected to retard the economy’s rate of capital formation, reduce its level of employment and output and ultimately the pace of economic growth.

The Impact of Bank Distress on Commercial Banks

Share This

Details

Type Project
Department Banking and Finance
Project ID BFN0941
Price ₦3,000 ($9)
No of Pages 45 Pages
Format Microsoft Word

500
Leave a comment...

    Details

    Type Project
    Department Banking and Finance
    Project ID BFN0941
    Price ₦3,000 ($9)
    No of Pages 45 Pages
    Format Microsoft Word

    Related Works

    CHAPTER ONE 1.0 INTRODUCTION 1.1 BACKGROUND OF THE STUDY In any modern economy, the efficient production and exchange of goods and services requires money and bank is the instrument for affecting it. The last few years have... Continue Reading
    ABSTRACT This work “Evaluating the impact of Bank Distress on the profit growth of commercial banks” has the objective of showing the effect of distress on the profit growth of commercial banks. The causes of bank distress in Nigeria and the possible prevention strategies or failure resolution options of bank distress. The review of... Continue Reading
    PROPOSAL The topic “Evaluating the Impact of Bank Distress on the profit Growth of Commercial Bank, (A case study of selected Commercial banks) The Topic “Evaluating the impact of Bank Distress on the Profit Growth of Commercial Banks” is posed to appraise the effect of distress on the profit growth of commercial  banks. It measures the way... Continue Reading
    (A CASE STUDY OF SELECTED COMMERCIAL BANKS) ABSTRACT This work “Evaluating the impact of Bank Distress on the profit growth of Deposit Money Banks. The causes of bank distress in Nigeria and the possible prevention strategies or failure resolution options of bank... Continue Reading
    (A CASE STUDY OF SELECTED COMMERCIAL BANKS) ABSTRACT This work “Evaluating the impact of Bank Distress on the profit growth of Deposit Money Banks. The causes of bank distress in Nigeria and the possible prevention strategies or failure resolution options of bank... Continue Reading
    THE STRATEGIES FOR AVOIDANCE OF DISTRESS IN NIGERIA COMMERCIAL BANK (A CASE STUDY OF FIRST BANK PLC ENUGU) ABSTRACT This project gives a description of the practical knowledge and working experience acquired by me, during my staying in school, and some research made so far. In that case, I started this project with a brief description of the... Continue Reading
    PROPOSAL This research project titled “Financial distress in some Commercial Bank Reasons, Consequences and solution in made up of five chapters. Chapter one will look in to the introduction, background of the study, objective of the study, statement of problem, research question, hypothesis and limitations of the study. Chapter two will be... Continue Reading
    ABSTRACT A descriptive study was made about financial distress in some Commercial Banks using secondary statistics. This research work was designed to describe the Financial distress in some Commercial Bank in Nigeria. Also the causative factor as it affects Commercial Banks with the limited area of coverage. The study also look at the following... Continue Reading
    CHAPTER ONE INTRODUCTION BACKGROUND OF THE STUDY In Nigeria, Commercial Banking dates back to 1894 when the Bank of British West Africa (BBWA) was established. Since then, the general concept of the Nigerian Commercial Banking has changed... Continue Reading
    ABSTRACT A descriptive study was made about financial distress in some commercial banks using secondary statistics. This research work designed to describe the financial distress in some Commercial Bank in Nigeria. The study also took at the follow objective such as; nature and types of financial distress facing source commercial banks, the banks... Continue Reading