TABLE OF CONTENT
1.1 Statement of problem and objective
1.2 Rational of study
1.3 Significant of the study
1.4 Background of the study
1.5 Definition of term
2.1 Theoretical Review
2.2 Empirical Review
Hypothesis Methodology, Sources Of
Data And Limitation Of Study
3.1 Hypothesis of study
3.2 Methodology of study
3.3 Sources of data
3.4 Limitation of the study
Data Presentation, Analysis and Discussion Of The Result.
4.1 Presentation of Data
4.2 Analysis of data
Summary, Conclusion And Recommendation
5.1 Summary of the entire work
1.1 STATEMENT OF THE PROBLEM / OBJECTIVE OF STUDY
Banks is very important in the life of a nation according to Umoh (1994) the banking industry plays the role of the engine of growth for the economy, the view was supported by Bello (1993)
The Banks Faced a lot of Problem which made the customers to be fraud of the of their deposit and banks themselves are worried of whose problem and how they will manage their activities on the affair of the banks to ensure efficiency to avoid distress.
The problems faced by banks are as follows
Poor loan management
Inadequate capital base
Fraudulent and corrupt practices of owners and managers
Poor Asset / liability management
CCBN briefs (1998)
Lack of Adequate knowledge.
All of the above constitute crisis in the banking industry and this research work will be carried out to proffer solutions and preventive measures to the problems
1. 2 RATIONAL OF STUDY.
This research believes it is very important to carry out this research work because crisis in the banking industry has affected the economy in several ways.
It has led to increase in interest rates as depositors ask for higher rates of return for perceived higher chances risk of financial loss.
Crisis in the Banking Industry has led to unemployment, which leads to fall in aggregate demand and consequently a reduction in the production level Orijh (1998).
It has to deposit ruin this affects adversely liquidity and earning capacity of the banks and consequently resulting to decline in availability of invisible funds in the economy.
This research null enables the management of Bank to manager effectively and efficiently.
1.3 SIGNIFICANCE OF THE STUDY
The writer hopes to achieve a great thing at the and of the study. This project will help many that are interested in the banking industry.
It will help than to know the causes of distressed how it can be prevented it will also help to satisfy the need of the following people.
1. Future researchers: It will serve as companion to future researchers who are interested on cause of distress, economic implication and possible remedies.
Investors: It will help them to know that distress exist in banks by so doing they will be careful not to investing banks were there is problem of distress.
Bank: It is of great benefits to bankers when they notice fraud or poor loan management, which will lead to distress they will try to prevent it to avoid liquidation.
Students: It will enlighten the student and afford them the opportunity of appreciatively the contribution towards their study.
It will also help the public or enlighten the public on how distress has cause a lot of problem in our economy.
1.4 BACKGROUND OF THE STUDY
According to Dr J. Orjih (1998) the problem of bank distress and failure was observed in the country as far as 1930 and 1958 with the failure of 21 banks Between 1989 and 1996, the financial of conditions of many banks as well non Banking financial institution worsened significantly That become in the late 80’s several other financial institution became distressed in Nigeria.
It was observed that the number of distress banks increased from 8 to 52.
However, in 1997 there was decrease in distress bank due to action taken by CBN a total of 17 where taken over by CBN in 1995 and one in 1996.
In the 197 the Nigeria deposit insurance corporation (NDIC) took over the supervision and control of distressed banks. Since the crisis in the banking system the CBN has revoke the license of 31 banks between 1994 to 1998 (CBN) briefs (1989).
1.5 DEFINITION OF TERMS
From my under standing I can define crisis as a time of difficulty or danger and in Oxford advanced learners dictionary defined crisis as a time of difficulty or danger. It could also be seen as a time of problem.
Management: It means getting things done through other people. It may be looked at as a distinct process consisting of activities (planning, organization, motivating and controlling) performed of human and material resources.
It is an activity that converts disorganized human and physical resources into useful and effective result Orjih 1998.
DISTRESSED: definition by, Oxford (Advanced learner Dictionary defined distress as a State of being in danger or difficulty and needed help.
DISTRESSED BANK: A bank may be classified as being distressed when it is unable to meet the bank examination rating system (CAMEC).
Under this critcinon, a bank’s performance is assessed based on its ability to meet the following five conditions
Also a bank can be declared distressed when it is not able to meet balance sheet test of having enough assets at market value to cover its liabilities Orjih (1998).
Bank: Bank is an Orjih organization or place that provides financial services Oxford advanced learner dictionary). Any firm, corporate company or society carry on banking business and approved by the minister.
BANKING BUSINESS: It can defined as the business of receiving deposit on current account, savings account or other similar account, paying or collecting cheque, drawn by or pad in by customer provision of finance or such other business as the governor may by order published in the gazette (Ukemenam 2001) .
According to salimon (2001), the CBN assistance director, cooperate and Hours warned against a list of bank regarded as been distress to avoid a run on such banks.
(B) ECONOMIC CONSEQUENCE:
Banks are central to an efficient and effective payment system in any country. But with failure payment system would become precious since the link between the real sector and the financial sector including international settlement would be impoured.
This will inhibit effective competitions and efficient financial intermediation.
Bank distress also leads to loss of money on the part of depositors, share holders as well as government, for instance in 1999 the cost of resolution of distressed banks rose to N6.2 billion from N4.5 billion in 1993, the high cost of distress resolution has significant fiscal and monetary implication as tax payers, through the government would eventually be require for the resolution of bank failure (Ebghoclaghe 2001).
From the 33 banks that were distress and consequently Liquidated a total loans and advances at closure was about N31, 635,97 million, only N3.0-63. 23 million was recovered at december 31. 200. However, this represented 1.74% increase of the total loan and advances from N.796. 87 million, (NDIC Annual report 2001).
(C) GLOBAL EFFECT
The primary counter parts of foreign creditors are the banks as they are the financial gateway to a country, with bank distress.
The international perception of the banking system would be that of suspicion as it will be feared that their find could be locked up and or lost in the banking system.
In most cases, the international community, accept those among them involved in criminal practices such as advanced fee frauds and other types of frauds would not extend credit to a country in which its banking system is distressed.
This would undoubtedly compromise foreign investment and lead to reclamation of capital flight out of the country (NDIC quarterly 1997).
Bank distressed leads to increase interest rate as depositors ask for higher rates of return for perceived higher chances of bank failure and consequent risk of financial loss.
Bank distress causes unemployment through retrenchment of workers in the distressed backs.
This has adverse consequences for dependents of the retrenched staff.
It leads to fall in aggregate demand & consequence a reduction in the production level.
Bank distress has already degenerated to bank failure and loss of depositors funds.
The maximum amount refundable to each account holder under the NDIC cover for fouled banks is N50, 000 out standing to the credit of their accounts are not paid the difference failed banks would be incapacitated from extending new lending,
The healthy once would be similarly be constrained from granting credit for fear of such facilities becoming diligent, if credit are extended at all they are likely to be short term and mainly to finance commerce and the purchase of further crowd out the productive sector which must be galvanized for the economic.