1.1 BACKGROUND TO THE STUDY
Commercial banks are generally
all-purpose retail bankers, Ajayi (1991). They mobilize deposits of all
sizes and from all and sundry in retail as well as in wholesale markets.
They engage mainly in borrowing and lending activities. The lending
activities of Nigerian commercial banks have been increasing steadily
over the years and recently, the pace of increase has acquired a tempo
that needs some explanation. Management of banks is the process of
managing money and providing a whole gamut of banking services.
Beginning with the management itself, it involves finding the optimal
size and composition of banks overall assets and liabilities, Nwankwo
Considering the supervisory and
regulatory role of NDIC on commercial banks with the aim of protecting
customer’s bank deposits, banking supervision seeks to reduce the
potential risk of failure and ensures that unsafe and unsound banking
practices do not go unchecked. Bank supervision is a supervisory
function charged with the responsibility of ensuring the safety and
soundness of the banking system as a whole. Books and affairs of every
licensed insured institution are examined as a means of meeting its
supervisory mandate. This function is performed through the off-site
surveillance and on-site examination of the books and affairs of the
banks, which exceptions are reported and recommendations made on how the
observed lapses can be corrected, and the implementation of such
recommendations is monitored through scheduled post examination visits
to the affected banks (Garcia, 1998).
Commercial bank supervision is a
supervisory function charged with the responsibility of ensuring the
safety and soundness of the banking system as a whole. While on the
other hand Regulation involves providing input into developing and
interpreting legislation and regulations, issuing guidelines, and
approving requests from regulated financial institutions.
Commercial bank Supervision in the NDIC
is the responsibility of three departments, namely, Bank Examination
Department (BED), Insurance & Surveillance Department (ISD) and
Special Insured Institutions Department (SIID). As the names imply,
on-site examination is carried out by BED and SIID while the ISD is
charged with the responsibility of maintaining off-site surveillance
over all insured banks. Both the On-site and Off-site supervision ensure
that the insured institutions remain healthy at all times and/or where
there are problems, they would be detected and addressed promptly. In
addition, supervision protects the bank depositors, encourages
competition among banks and assists in efficient and orderly payment
system (Ebhodaghe, 1991).
The Nigeria Deposit Insurance
Corporation (NDIC) was established on 15 June 1988 to strengthen the
safety net for the newly liberalized banking sector, following the
recommendation of former Central Bank of Nigeria governor Ola Vincent.
The NDIC provides a safety net for depositors in the newly liberalized
banking sector (Ebhodaghe, 1991).
The NDIC is a parastatal under the
Nigerian Ministry of Finance. The corporation is charged with protecting
the banking system from instability occasioned by runs and loss of
depositors' confidence. It operates under the Nigeria Deposit Insurance
Corporation Act (1990). The NDIC is a member of the Financial Reporting
Council of Nigeria. The NDIC complements the regulatory and supervisory
role of the Central Bank of Nigeria (CBN), although it reports to the
Federal Ministry of Finance. The NDIC advises the CBN in the liquidation
of distressed banks and manages distressed banks' assets until they are
1.2 STATEMENT OF THE PROBLEM
Regulation and supervision of commercial
banks remain an integral part of the mechanism for ensuring safe and
sound banking practice. At the apex of the regulatory and supervisory
framework for the banking industry is the Central Bank of Nigeria (CBN).
The Nigerian Deposit Insurance Corporation (NDIC) however, exercises
shared responsibility with the Central Bank of Nigeria for the
supervision of insured banks. Active co-operation exists between these
two agencies on both the focus and modality for regulating and
supervising insured banks. This is exemplified in the coordinated
formulation of supervisory strategies and surveillance on the activities
of the insured banks, elimination of supervisory over lap,
establishment of a credible data management and information sharing
system. This study however focuses on examining the role of NDIC in
regulation and supervision of commercial banks in Nigeria.
1.3 OBJECTIVES OF THE STUDY
The following are the objectives of this study:
- To examine the role of NDIC in the regulation and supervision of commercial banks in Nigeria.
- To identify the reason for the regulation and supervision of commercial banks in Nigeria.
- To determine the effectiveness of NDIC in the regulation and supervision of commercial banks in Nigeria.
1.4 RESEARCH QUESTIONS
- What is the role of NDIC in the regulation and supervision of commercial banks in Nigeria?
- What are the reasons for the regulation and supervision of commercial banks in Nigeria?
- What is the effectiveness of NDIC in the regulation and supervision of commercial banks in Nigeria
HO: NDIC does not play significant role in the regulation and supervision of commercial banks in Nigeria.
HA: NDIC does play significant role in the regulation and supervision of commercial banks in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
The following are the significance of this study:
- The results from this study will enlighten the stakeholders in the
banking sector especially the commercial banks and the general public on
the role of NDIC in the regulation and supervision of commercial banks
- This research will be a contribution to the body of literature in
the area of the effect of personality trait on student’s academic
performance, thereby constituting the empirical literature for future
research in the subject area.
1.7 SCOPE/LIMITATIONS OF THE STUDY
This study will cover the commercial
Banks in the selected towns of Edo State. It will also cover the role of
NDIC in their regulation and supervision.
LIMITATION OF STUDY
Insufficient fund tends to impede the efficiency of the researcher in
sourcing for the relevant materials, literature or information and in
the process of data collection (internet, questionnaire and interview).
Time constraint- The
researcher will simultaneously engage in this study with other academic
work. This consequently will cut down on the time devoted for the