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THE EFFECT OF BANK REGULATION ON STABILITY OF NIGERIA BANKING SYSTEM
BACKGROUND OF THE STUDY
Even since the inception of the first three successful indigenous banks in Nigeria, the National Bank of Nigeria established on February 11th 1933, the Agbommagbe Bank (now wema Bank Nig Plc) in 1945, The African continental Bank Plc in 1947 and others subsequently established in the country during the period from 1952 when the first banking ordinance was enacted to regulate and control the activities of commercial banks in the country till present day, prand have remarried a permanent feature in our banking industry.
During the free banking era (between 1892 and 1952) there was no form of banking act or ordinance to regulate the stabilities shipment and operation of commercial bank. There are as it is presently supervised. Many bank were registered. Some of did not open their doors for business ever for a day while some simply collected customers deposits and varnished. This had resulted to the deprivation of our economy an as a whole the much needs fund for development and depriving individual the hard earned funds, this also brought about loss of faith trust on the commercial banks by Nigeria and the subsequent under developed banking habit in the country
However, with the introduction of the first banking ordinance in 1952 and the central bank of Nigeria (CBN) ordinance in 1958 to regulate and control the activities of commercial banking in the country fraud in commercial banks have rather increased in size, and method used by fraudster acquires greater sophistication day by day. Presently with the introduction or modern banking procedures ie improved communication system, automatic electronic gadgets and computers networks into our banking system coupled with various precautionary measures taken by banks. To prevent fraud in the banks fraud have rather taken unclear dimension and the six and form involved increase in a geometric progression. Other Amptiam in his articles obstacle o growth of baking industry saw that it was discovered during investigation that bank now take extra precaution before clearing a cheque because of rampant incident of fraud and forgeries the form of fraud has placed banks loss on the average of # 1m per each working day of the year in Nigeria Asimi kola in his own article “The cash economy phenomenon” also observed that fraud has become sophisticated as to make forget cheque book good the owner to confirm it as his own signature recently in the bid curb the grand fraud, CBN issued a directive to bank to increase it capital base to # 25 billion. Previously section a of the decree 1990 state that, the minimum paid up capital for bank is #50 million for commercial bank. This directive come up after several bank has been discovered to have defrauded it is customers mostly foreign investors. In this required .
Bankers in a bid to reduce the size and rapid occurrence of fraud in their bank now take adequate precautionary measure before clearing cheques drawn their customers accounts. These precautionary measures bring into focus another problem facing commercial banks,. The problem of time wastage in the banking hall. Ashimi Kola in his article also said that customer waits a minimum of about two hours in banking hall of Nigeria banks to cash their money. This is one of the most legitimate criticisms of the quality of bank services. The checking process is long and by the time a cheque is released to cashier for payment, the customer is frustrated and perhaps fast asleep among fearing crowd. This calls for an overhaul of the checking and control system. E above being the general situation of things in commercial banking fraud is there fore number one enemy to all concerned with growth and development of banks., the intention of this research work therefore aimed at identification of the fraud on Nigerian economy in general and on Afribank Nigeria plc Enugu in particular and recommend more functional measure that will help in the prevention and to reduction of fraud in commercial bank in Nigeria.
STATEMENT OF PROBLEM
The focus of this study is to provide evidence bearing on the nature and factors leading to ineffective management in bank, also it actually evaluates the uneremental effect of bank regulation on stability of Nigeria banking system
INADEQUATE INTERNAL CONTROL SYSTEM
Owing to peculiars nature of banks in trading on financial asset and liabilities, there is high propensity towards fraudulent manipulation by both employees and those outside the bank to install internal control system that will help to eliminate stop and arrest fraudulent tendencies and ensure effectiveness in performance of its functions. It is the function of the internal control unit to assist management in achieving effective. The consequences of lack of adequate internal control system in direct and financial term can not be over whelmed. Thus banking sub-sector has been witnessing as phenomenal increase in reported bank fraud ruing in hundreds of million of naira annually. These occur in form of computers frauds, deflation misrepresentation of document outright disappearance with physical cash by employees and outsiders and the re occurring problem of banks branch mangers granting credit over their discretionary as approval by the top management without adequate security hence resulting to losses and increased bad debt
INEFFICIENT WAYS OF TRANSACTING BANKING OPERATION
Most banks operate business in such inefficient way that their target and budget becomes always unrealistic thus leading to negative result and poor performance. The end result is that while efficiently managed banks are seeking approved to open new branched the mismanaged ones are busy glamouring to be allowed to close unliveable branches one even close their door entirely. The problem of lack of economy and efficiently in operator is more serious than fraud as it is mammals of procedures. Recording of some transaction of bank by employees are not done in conformity with established standard hence resulting to back of unbalanced book and records.
123 LOAD LOSSES AND INCREASING BAND DEBT PORTFOLIO OF BANK
Increasing bad debt portfolio of banks inherent from high credit default by ,loan users has been giving bankers sleepless night as a substantial part of their income is row used as a provision against these debt in view of the requirement of prude initial guidelines for licensed bank issued by the central bank of Nigeria in off Nigeria in 1990, in 1991, financial year, most of the existing bank will hinge portfolio after report losses or very minimal profile position ,after making the necessary provision are required by the guidelines.
It is because the continuous concerns of government and other regulatory bodies about the problem of banks and the serious need for effectiveness by their management that various registrations and directive were made in the recent time the CBN issued directive to bank for recapitalisation up to N25 billion, in January 1991 CBN issued circulated to all bank directors an information book lets (pocked Guide for bank Directors) Equally in 1991, the Bank and other financial institution decree was promulgated by government.
PURPOSE OF STUDY
The principal purpose of lilies study is to identify and explain how the effect of bank regulation on stability of Nigeria bankin system the study
However, in more specific term, lies study scale to
Identify to what extent adequate internal control is Banking system
Fund out the extent of ineffective way of Nigeria banking operation.
Determine the overall loan losses and increasing bad debt portfolio
SIGNIFICANCE OF STUDY
The usefulness of this study entitled effective internal control as a basis for prevention detection of fraud can not be over whole the researcher was motive into embarking on this study because of the positives result accruable from an adequate internally control organization. Equally the result of this study would be immense benefit to numerous group of persons such as Auditors, External Examiners, Managers, the Accounting and Banking professions, Regulatory bodies of banks and other operators in the banking system. When the society is corrupt, wealth an groritied irrespective of its sources. The desire to join the political and the ruling class may compel most bankers to throw professional ethic to the winds for praudul practices. This therefore makes study very important.
Acknowledgement of the possible causes of disease will assist a medical doctor to give4 adequate prescription for the prevention and cure of disease similarly, it will be pertinent to analyze and recommend directive, preventive and curative measure to check fraud and distress in banks. Indeed internal control machinery when installed can do this ,Also recruitment not based on sentiments but on personal integrity will prevent recruitment of weptomanaic, greedy and ungodly people in bank.
It is believes that for effective management, management by example should be the watch word of every banker, be he a director, manager officer, supervisor clerk, or messenger. Everyone should be made to comply with the lay down policed and procedure in performance of any banking function. He who says people should not steal should not steal too.
This study is on appraised of internal control as a basis for fraud prevention and detection. It intend to create relevant theoretical concepts and relates them Adri bank plc in Enugu in a way that it would be helpful to those concerned with the management.
In a nutshell this theses is based on the following question
To what extent are banking operation effective in Afri bank?
How adequate is the attitude and perception of banking transaction
What extent are FRAID AND IRRECULARIDES occures in Afri bank
SCOPE AND LIMITATION OF STUDY OF THE STUDY
The scope of this study is designed to cover management function of internal control will particular reference to Afri bank plc. This research work met a lot of difficulties First the bank visited was reluctant to gives out relevant statistical data on financial frauds occurring in their banks. None of these banks denied of ever being a victim of fraud this is non compliance
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