IMPACT OF STRATEGIC TREASURY MANAGEMENT IN THE BANKING INDUSTRY (A Comparative Analysis of Union Bank Plc and UBA Plc, 2000-2010)
ABSTRACT
This research work was conducted to examine treasury management strategies and challenges in the Nigerian banking industries, identifying the various types of bank treasury product, their challenges and the strategies applied by different banking marketing their new and existing treasury products.
This study analyzed the treasury management responsibilities assumed by financial department and develops a model to confirm those responsibilities. This study has also developed an explanatory model that brings together the main functions of the treasurer by means of two concepts. i. basic cash management which group the management or collection and payments, liquidity monitoring in banking operating, short term treasury forecast, management of banking balances on value date and negotiation with financial organization and ii. “Advanced cash management which includes the management of the financing of the position of treasury peaks and the management of financial risk.
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Treasury function emerged as a result of the sophistication of banks, After the Recapitalization of banks, capital to #25billion in 31 December, 2005 due to the increasing competition, banks have initiated a lot of product of enhance their treasury function, knowing that treasury product which is an important aspect of banking activities that a bank operate at a short end of the financial market. Indeed, treasury function is a critical tool for controlling liquidity. Interest rate and off balance. Sheet risks, loan deposit, borrowed fund pricing and the execution of assets and liability management policies.
Management of banks treasury comprises fund acquisition, investment in marketable securities, hedging and management for the banks reserve account at the central bank, for a bank to remain profitable and also be able to manage their liquidity position, such bank should develop treasury management strategies needed to compete with other banks in the industries, they should also develop and market new treasury product which will enhance their liquidity and profitability position.
Bank when trying to manage its products face many challenges which may come from customers when deciding on going to the other, bank that they can understand their treasury product or collect prime interest rate. Another challenge may be from the regulatory authorities (CBN) by trying to regulate the liquidity position of commercial banks new polity guidelines which all banks must comply with.
1.2 STATEMENT OF THE PROBLEMS
The treasury management and inadequate liquidity has recorded some initial failure on banks.
The inability of the union Bank plc and UBA bank plc fulfill both its short and long term obligation, it is based on the management of liquidity.
1.3 OBJECTIVE OF THE STUDY
The under listed point generally make up the objectives of the study, they are as follows:
To investigate the various techniques it treasury management in UBA Plc and Union bank plc and also identify peculiar problems in the management of treasury products.
To find out if the bank have initiated new strategies in marketing and management of their treasury product.
To find out the challenges encountered by banks in managing their treasury.
To find out how the banks are monitored and supervised on CBN general policy guidelines.
1.4 RESEARCH QUESTIONS
The research question for this work is stated below:
Can management of banks treasury be a critical tool for controlling its liquidity?
Does management of banks reserve account a CBN by managing the banks balance on required account?
Can marketing of banks treasury product be an important aspect of banking activities?
Is new product development the basis funding strategies in banking?
Can management of bank treasury help in economic development?
1.5 STATEMENT OF HYPOTHESIS
1) H0: management of banks treasury is not a critical tool for controlling its liquidity.
H1: management of banks treasury is a critical tool for controlling its liquidity.
2) H0: The management of bank treasury does not help in economic development in Nigeria.
H1: The management of bank treasury help in economic development in Nigeria.1.6
SIGNIFICANCE OF THE STUDY
Treasury function which is the critical tool used by the banks to manage their liquidity position, will help the banks to be able to know the new strategies used by their competitors to manage their treasury products.
It will also help the regulatory authority (CBN) to regulate the monetary policy thereby enhancing economic development.
Academically, it will be one of the sources through which students and or researcher would understands the different forms of treasury, products, the strategies used by banks to manage their treasury effectively and efficiently; and also help them to do more research work on management of banks treasury.
1.7 SCOPE OF THE STUDY
The researcher intends to know how the banking industry manages their treasury function because treasury management which is known as the critical tool used by banks to management their liquidity position by knowing when to Invest short, medium or long term and also the amount of cash to reserved in their fault. In carrying out this research work, the researcher will specialize in two banks i.e union bank plc and UBA plc as areas covered in this research work, which the findings, conclusion and recommendation will cover the entire system.
1.8 LIMITATION OF THE STUDY
One of the major limitations is time constraints since the project is expected to be completed within a short period of month. Another limitation is lack of statistical data and literature to review for the project work. Financial constraint is also one among the limitations. Furthermore, because of oath of secrecy sworn by the banks officials and fear of divulging vital information to their competitors some staff members of union bank and UBA Plc found it difficult to release necessary information for this work. This did not in any way affect the validity and reliability of this project because the researcher painstakingly ensured that all relevant fact on ground were investigated.
1.9 DEFINITIONS OF TERMS
Analysis: to study in detail by breaking its down into various parts, to submits to certain test order to identify its constituents to breakup into its simplest element.
Bank: This is a financial institution that provides banking services.
Control: A credit policy package should have in monitoring device for comparing of commercial returns to be rendered periodically.
Comparative: having to do with comparison or comparing what is similar and different in two or more branches of knowledge measured or judged by company.
Hypothesis: This is the preparation when someone is carrying out an investigation on a particular subject to be made ahead of time before embarking on the investigation by hypothesis could be negative or alternative (position) hypothesis.
Management: This simple means getting work done through other people.
Policy Guideline: this is the totality of the rules, procedures and processes, which the management and banks adopts to guide them in their duties.
Target Market: This refers to customers of the bank.
Loan: A loan is credit facility extended by one party (lender) to another party borrowed subject to specific and condition agreed by both parties.
IMPACT OF STRATEGIC TREASURY MANAGEMENT IN THE BANKING INDUSTRY (A Comparative Analysis of Union Bank Plc and UBA Plc, 2000-2010)