FINANCIAL DISTRESS IN BANKING INDUSTRIES CAUSES AND IMPLICATION
ABSTRACT
The study concerned mainly with an investigation into financial distress in banking industries causes and implication. By way of background the study commence with overview of the distress and failures in Nigerian banks.
Available documents on bank failure/distress had shown that distress of financial institutions bank to be precise did not start recently but had long existed even before independent. To identify the main causes and effect of financial distress in banking industry data were collected through the distribution of questionnaires to 80 respondents first bank of Nig Plc and secondly through extensive review of earlier studies written relating to research project topic. Data collected were analyzed and tested using percentage.
The main findings based on the analysis and subsequent test shows that the external environment factors (regulatory constraints economic down turn and political instability) and internal environment factors lack of monitoring exepreince and poor portfolio management contributed in varying degree to financial distress in banking industry. Based on the findings the researcher made possible recommendations to correct ugly effect recorded as the root causes of financial distress in banking industries in Nigeria
Therefore considering these it will be of great importance to every individual in all aspects of field of life.
CHAPTER ONE
In Nigeria today there is distress in almost the entire environment in industry law enforcement transport communication financial institutions and the host of others.
In other words bank being a people and confidence based industry has being the most pronounced industry that is in distress not only that bank is a place where valuable are kept for safe custody but it is a critical bridge between deficit and surplus between dreams and commerce between theories and industrialization in any economy. It is a cornerstone industry of a nation.
The word distress mean different things to different people but generally it is said to be a state of unhealthy condition.
Bank is said to be distress/failure when it cannot be able to meet with its objective or its obligations due to first and foremost to its customers shareholders and the community where it was established. There are factors that are responsible for the high level rate of banking failure/distress in banking mismanagement insider abuse fraudulent activities of staff capital inadequacy poor asset quality economic factors and others. It is those problems that is of major concern of this project.1.1 BACKGROUND OF THE STUDY
Having introduced the issue of distress and failure in companies in Nigeria, it is also necessary to treat the issue of distress and failure in Nigerian banks although banks by statutory legislation are companies yet they are in many ways different four other companies. For one thing they are service companies they are more regulated and monitored than other companies or services institutions or sectors.
By the provision of the Nigerians law, banks and other financial institutions decree No 25 of 1991 section 20 a bank is not to keep fixed assets except as may be required for the normal running of its business. A bank is not to hold much interest (equity) in any other business except in banking business.
A bank is required to have a cash reserve of 80% and a liquidity ratio of 30% . the liquidity that 60 banks were adjusted distressed in 1995. there are also many other distressed bank after that
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