CONTROL OF THE CENTRAL BANK ON THE PERFORMANCE OF COMMERCIAL BANKS
(A CASE STUDY OF ACCESS BANK NIG PLC LAGOS BRANCH)
This research project tends to evaluate the impact of supervision and control of the Central Bank on the performance of commercial banks. Access Bank Nig Plc Lagos Branch was used as the case study. To aid this research both primary and secondary data were collected. The instruments used to collect data are questionnaires and oral interviews. The respondents comprised of male and female from the bank and the population put together is 150 and sample size is 109. The research design used for this work is the survey research method. In the course of this research the researcher found out that supervisory and control functions when conducted on a timely and unbiased manner ensures capital adequacy, high standard of conduct, moderation of bank charges and profitability. The researcher recommends that bank inspections should continue to be regular and timely enough; control measures of the CBN should not be too stringent as to have long negative impact on banking operations. Finally only competent, skilled and unbiased bank examiners should be engaged in bank supervision.
1.1 BACKGROUND OF THE STUDY
The roles of commercial banks play in the process of economic development in every country are crucial. They through financial intermediation increase the levels of national savings and investments by mobilizing idle funds from surplus spending units (savers) and channel them to deficit spending units(borrowers) for investments in the economy . (UGBAJA 1999)
By playing these roles within a particular country, the independence of global economics created the need for global interbanking, a trend which in turn emphasizes the need for the stability of the banks involved in intercontinental banking transactions.
Also, banking business carries a lot of risks and banking public needs assurance about the safety of their confidence in the banking institutions.
The need for supervision and control of commercial banks activities is to ensure that they adhere to the stipulated monetary policies, rules and regulations as well as accepted ethical conducts. However the major contributing factor that has led to the failure of Nigerian banks in the past can be described as moral hazard (adverse incentives)
Moral hazards or adverse incentives are a concept with relevance to a variety of principal agent relationships characterized by asymmetric information. The moral hazard concerns the adverse incentives on banks chief executives to act in ways which are contrary to the interests of the banks creditors (mainly depositors or the government if it explicitly or implicitly insures deposits) by undertaking risky investment strategies (such as lending at high interests rates to high risk borrowers) which, if successful, would ` jeopardise the solvency of the bank. Bank owners have incentives to undertake such strategies because with limited liability, they bear only a portion of the downside risk but stand to gain through higher profits, a large share of the upside risk. In contrast, the depositors (or the deposit insurers) gain little from the upside risk but bear most of the downside