Inspection as an Aid to Effective Bank Management (a Case Study of Union Bank of Nigeria)
OBJECTIVES OF THE STUDY
In lieu of the problems stated above, the objectives of the study are
- To analyse the objectives of inspection of commercial banks in view of the existing monetary policies of the
- To examine the effectiveness of the supervisory and control techniques of the CBN specifically the ability detects malpractice on time
- To assess the impact of inspection on the effective management of commercial banks with regards to liquidity
- To appraise the ongoing reforms of the CBN
CHAPTER TWO
REVIEW OF RELATED LITERATURE
In this chapter, some relevant issues and literature which bother on the subject matter are reviewed.
THEORITICAL FRAMEWORK OF THE STUDY
Bank inspection is a function charged with the responsibility of ensuring the safety and soundness of the banking system as a whole. Books and affairs of every licensed bank are examined as a means of meeting its supervisory mandate. The aims and objectives of this function are as specified in the CBN Act of 2007, which include;
- To promote and maintain proper and reasonable financial services to the public.
- To ensure that depositors funds are safe.
- To ensure high standard of conduct and management throughout the banking system.
- To control expansion and channel funds to productive sectors.
- To scrutinize entry and exit and in essence, and under capitalization of banks.
- To ensure equitable spatial distribution of financial series.
- To regulate the conduct of chief executive officers, directors and employees of licensed banks.
- To monitor risks taken by commercial banks.
- To ensure healthy competition among commercial banks.
In order to achieve these objectives however, section 31 of the BOFIA Act 2004 gives credence to the supervisory role of the CBN. They include; There shall be an officer of the bank (CBN) who shall be appointed by the governor to be known as the director of banking supervision or by such other title as the governor may specify.
The director of banking supervision shall have power to carry out supervisory duties in respect of banks, and for that purpose shall:
- Under conditions of confidentiality, examine periodically the books and affairs of each bank
- Have a right ofaccess at all times to the books, accounts and vouchers of
- Have power to require from directors, managers and officers of banks suchinformation and explanation as he deems necessary for the effective management of his duties under this
- The Governor shall appoint to assist the director of banking supervision such other officers of the banks as the governor may from time to time ,decide.
- The officers may be designed examiners or have such other titles as the Governor may
- For the purpose of this section, references to examiners are references tothe director of banking supervision and any officer of the bank appointed pursuant to subsection (3) of this
- In examining the affairs of any bank under this Act, it shall be the duty of anexaminer at all times to avoid unreasonable hindrance to the daily business of the
- Every bank shall produce to the examiner at such times as the examinersmay specify all books, accounts documents and information which they may
- If any book, document or information is not produced in accordance withthe requirement of an examiner under this section or what is produced or furnished to an examiner is false in any material particular, the bank is guilty of an offence and liable on conviction to a fine of N100000 and in addition, to a fine of N10000 for each day during which the offence
Though with very wide powers, the CBN was not known for taking radical decisions in the past until 2000. The powers of the CBN to grant licenses carry with it obligation to ensure that existing and incoming banks are properly scrutinized. When the license of a bank is revoked, under extreme situations, the next thing is for the CBN to call on the Nigerian deposit insurance corporation (NDIC) as liquidators whose main duty is to see the orderly winding up of the bank. In some cases where the liquidity of a bank is considered too problematic by the CBN, it may consider the option of putting up such bank for sale to local or foreign investors.
CHAPTER THREE
RESEARCH METHODOLOGY
In this chapter, the procedures adopted and techniques employed in carrying out this study by the researcher is stated and explained.
RESEARCH DESIGN
Research design has been described as the specification of procedures for the collection and analysis of data necessary to define and or solve the problem.
By the nature and design of the study, it can be described as a descriptive survey research, through a survey carried out on a sample of respondents randomly selected from the study population.
In data treatment, the researcher used tables in the presentation. In the analysis the techniques of frequency and percentage are applied
SOURCES OF DATA
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The data used by the researcher for the purpose of the study are the primary and secondary sources of data.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
This chapter presents the analysis of data generated from respondents during this research study.
Analysis made and presented in this chapter is based on questionnaire distributed to staff and management of Union Bank Nig Plc. However the total number of questionnaire administered were 109 out of which 101 were returned and 8 were not returned. The 101 questionnaires which were answered were used, unanswered questions were not used.
CHAPTER FIVE
SUMMARY OF FINDINGS AND CONCLUSION
SUMMARY OF FINDINGS
The main purpose of CBNs inspection of commercial banks are to ensure sound and healthy banking operations, safety of depositors’ funds, adequate capitalization, and reduction of high risk investments and prevention of moral hazards in the banking
- The possible impact of CBNs inspection includes but not limited to ensuring capital adequacy, high standard of conduct, sufficient liquidity and moderation of bank charges. It also improves the profitability of commercial banks on the long run and effective credit
- The supervisory and control techniques are effective and efficient enough to detect malpractices on time in the banking
- The ongoing reforms by the CBN currently reduce the ability of commercial banks to give loans and credit to the
- A good percentage of the management staff of banks believe that the abolishment of universal banking will adversely affect banking operations in
CONCLUSION
In conclusion, bank inspections should continue to be regular and timely enough, control measures of the bank should not be too stringent as to have long, and negative impact on banking operations, the ongoing reforms specifically the decision to re categorize, commercial banks should be revisited before full implementation, taking into consideration the negative impact which is not limited to the reduction in grants of credit loans to the public especially the private sector. Finally only competent and unbiased bank examiners should be engaged in bank supervision.
RECOMMENDATIONS
On the basis of the findings, the following recommendations were made:
- Bank inspections should continue to be regular and be carried out also in a timely and unbiased manner so as to identify any unhealthy developments in the banks early enough and deal with it on
- Only competent and skilled bank examiners can effectively carryout supervisory and control Therefore regular training of banks supervisors are recommended, so as to keep them abreast with latest developments in supervision and investigation of banking operations and their financial reports.
- Reported cases of misconduct should be properly investigated and disciplinary actions taken
- The control measures should be designed and implemented in a way that it should not be too stringent as to have a negative impact on bank operations and performance specifically with regards to granting loans/ credit and profitability.
- The ongoing reforms by the CBN, specifically the abolishment of universal banking and re categorization of commercial banks should critically re-analysed as management of commercial banks under study faults its establishments
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