BANKING SECTOR DISTRESS: HOW TO AVOID FUTURE OCCURRENCE
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BANKING SECTOR DISTRESS: HOW TO AVOID FUTURE OCCURRENCE
ABSTRACT OF DISTRESS IN THE BANKING SECTOR AND HOW TO PREVENT IT IN THE FUTURE
This analysis is centred on examining financial distress in the banking industry, our economy’s apex transaction boot.
It is worth noting, however, that this study will not only expose but will also investigate the different mechanisms that have been put in place, largely and notably in the sector, to deal with problems that may undermine our banking industry and economy.
In this context, the study is expected to assist other financial houses in the Nigerian economy, as well as the managerial cadre, in enforcing discipline and strict measures against culprits and defaulters in the industry,
thereby enhancing proper operation and healthy growth of the industry and economy.
The researcher primarily use secondary data instruments. The findings were based on the information gathered.
Poor financial planning, ineffective control and supervision mechanisms, a lack of accounting databases, and government unfavourable policies or changes were discovered to be the primary causes of financial crisis, among other things.
The research also found that a high proportion of unqualified personnel and indiscipline had a significant role in this idea.
Based on the findings, the researcher provided several required and useful recommendations that, if followed by the government and financial banking management,
would assist to slow and promote rapid growth, raise profit maximisation in the banking sector, and strengthen our economic and economic position.
INTRODUCTION TO CHAPTER ONE OF DISTRESS IN THE BANKING SECTOR: HOW TO AVOID FUTURE OCCURRENCES
1.1 STATEMENT OF THE PROBLEM
The Nigeria banking business, the issue of money theft, and management are no longer stories, but something that society condemns.
Stress in the financial sector, particularly in banking, has resulted in significant losses and economic degeneration as a result of a lack of proper guidelines and standards in the industry (Ebihodaghe (1994) to this effect,
the economy has suffered drastically in recent times, this problem has caused and created so many hardships for the bank and their shareholders, Bellow (1993) most of the distressed banks in Nigeria suffered from fraud,
a lack of organisation, and managerial powers and proficiency. This also had a crucial role in the liquidation of other banks. The big question is how well will our banking business grow in tandem with the rate of “distress”?
The study’s current problem is centred on how to prevent hardship in the Nigeria banking industry so that the economy can expand and prosper.
1.2 THE RATIONALE FOR THE STUDY
Concerning the study’s purpose, it has to do with bank operations and the sector’s suffering, as well as determining the causes of bank collapse and offering measures to avoid future occurrences with acceptable and efficient strategies.
1.3. SIGNIFICANCE OF THE STUDY
The study’s significance is to determine how beneficial it will be. Among those who will benefit from this research are
Bank
It will assist banks in operating with profitability, credibility, and successfully and efficiently performing the task of banking intermediation.
Industry
However, it aids industries in establishing if daily or number distribution of events in the institution (bank) and how to prevent repeat occurrences.
1.4 BACKGROUND OF THE STUDY
Banks are seen as an essential component of any economy’s development and progress. The success or failure of the banking sector is a metric against which economic activity is judged.
Against this backdrop, it is argued that a strong financial system is a sign of the overall health of the economy. Distress has far-reaching ramifications for the country’s economy, some of which are addressed below:
v The situation resulted in a deposit run, which is the withdrawal of deposits by clients from troubled banks. It has a negative impact on the liquidity and earning capacity of banks, resulting in a decrease in the availability of ingestible funds in the economy.
v Second, bank distress causes interest rates to rise as depositors demand higher rates of return in exchange for the perceived higher danger of bank failure and financial loss.
v Bank crisis leads to unemployment through layoffs in distressed banks. This has a negative impact on the retrenchment of employees. It causes a decrease in aggregate demand and, as a result, a decrease in the product win level.
v In the long run, bank hardship may lead to bank failure and the loss of depositor cash. The highest sum recoverable to each account holder under the NDIC protection for bankrupt banks, regardless of deposit value, is #50.000.00.
v It also leads to a decrease in foreign investment in the country. Due to the uncertainty of the investment climate, overseas investors may decide to liquidate their accounts with distressed banks and shift their funds to countries with more stable investment environments.
DEFINITION OF TERMS
The definition of terms in this study could go through the topic to how the meaning of the project’s topic “distress in the banking sector how to avert future occurrence, audit, prevent, banks, distress, economy, guideline, liquidity, portfolio, practise, commercial banks, community banks, merchant banks, and deregulation.”
Audit
An expert’s official check and interpretation of the account
Prevent
A measure designed to prevent or deter the consequences of an activity.
Banks
Is a financial institution that manages money and provides credit and loans.
Distress
An assortment of activities, actions, or events that cause severe anguish or pain
Economy
The community system of exploiting its resources to produce riches, as well as the status of a country’s prosperity
Guideline
A set of guidelines for following a simple set of rules.
Liquidity
The measure or method of converting an asset into cash (liquid cash).
Portfolio
This can be characterised in financial terms as the collection of share distributions in terms of loan and advance, as well as sectorally.
Practise
This is a daily or routine distribution of event in the instruction (banking) operation.
Bank for merchants
Are legally created financial institutions that provide and operate in wholesale banking, medium and long term financing equipment, and long term financing equipment leasing debt. Factoring includes investment management, among other things.
Banks in the community
This is a self-sustaining financial institution owned and managed by a community or collection of communities to provide credit, deposits, and other financial services.
Bank commercial
Is an institution that collects or an institution that is established by law to fulfil some function such as deposit, acceptance, agency service, bailment, funding, transfer, and executorships.
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