ABSTRACT
Customers of
banks expect their bankers to provide them with loans and advances to makeup
any short fall in their funds requirement for transactional motive.
This project
is sub-divided into five chapters, which focuses on Risk Management in Nigeria
Banking Institution.
Questionnaire
were distributed to collect the relevant information from the respondent,
percentage and chi-square analysis were used and the hypothesis testing was
carried out, it was found that there is risk in bank which enable me to
conclude that there is risk in bank lending and because the rules of lending
are not often followed when granting credit facilities to their customers.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
The purpose of this project is to highlight the instability,
uncertainty, inaccurate planning and budgeting process and loss of effective
control management function in the financial institutions, occasioned by the
dynamic macro economic variable in Nigeria within the last decade.
The economic variables were introduced apparently to achieve
or obtain a level of economics sanity in the country, under different names
like structural adjustment programme, exchange control deregulation and price
control.
Consequently, the management of policy issues in financial
institution has become not only volatile but unpredictably difficult. It has
become toughly risky for those institutions to carry on their normal functions.
The banking industries are susceptible to all forms of risk.
It has an ageing long history in the overall operation of all banks.
Risk is a commonly used word. The Oxford learning
dictionary, defines risk as the possibility of meeting danger or suffering harm
or loss. All human and corporate under taking have certain element of risk to
avert risk, forward looking in management must show sufficient interest in the
management and control of these Operations in the bank and monitor the possible
impact these may have on the banking performance. This study attempts to
emphasize this point in bank management.
1.2 STATEMENT OF
RESEARCH PROBLEMS
Research work is carried out to investigate into some areas
that need more attention, which has not been focused or where there has been
work or ideals put forward in the areas. To this end, this work attempts to
find out a certain problems that affect the bank and try to suggest solution in
areas of pitfalls some of these problems included the followings:
Does the bank actually carry out critical assignment before
advancing credit?
Does the bank lack competent handling the sensitive areas of
risk control of the bank?
Does customers effectively utilize the fund borrowed to
endure return which consequently lead to payment?
Are the measures of loans recovering by the bank effective?
Does the intimacy of some loans seekers with the authorities
of the bank inhabit proper risk evaluation?
6. These and many
more are worth assessing in order to being a position to endurance a more
realistic measure, which when followed will bring about positive change in the
banking industry.
1.3 OBJECTIVES
OF THE STUDY
Based on the background information, this study, therefore
aims at examining and actually finding out how the banking industry in Nigeria
has been faring in management, managing risk in the bank.
The purpose of this research is to seek recondition with
their risk elements through the polices, as no bank can be in operation without
risk, there is a need to take such, risk as would be compatible with
profitability, liquidity and prudence. Realizing the profitability are
inversely related, it is the good management of risk that will achieved a locus
of feasible point exchange or the banks.
1.4 SCOPE OF
STUDY
This work is restricted to the bank under the study, Union
Bank of Nigeria Plc and no attempt was made to compare finding with what is
obtainable in other banks within the same sections, although reference could be
made in this regard when needed.
1.5 SIGNIFICANT OF STUDY
The significant of this research work includes among others,
the gains that accrue to the research, the bank and invariable to other
interested parties. Effectives management of risk in banks had been gained.
The work will enable the banks to know whether there is risk
when giving out credit to customers and whether the risk on existing credit
management system is in the line with the recommended credit policy laid down
by the central bank of Nigeria and not the necessary in the feature.
The result from this study shows that the research
frequently hope would provide the policy makers, head of organization most
especially the board of director of Union bank of Nigeria plc, a background of
this information for proper risk management system in the bank.
1.6 STATEMENT OF
RESEARCH HYPOTHESIS
Hypothesis could be defined as a statement of association
which are yet to undergo verification order to prove their validity or
otherwise such as preposition of this work included:
1 Ho: Some customers have the problems of
inadequate collateral securities of the loan requested for.
2. Ho: There is a
risk in bank leading, because the rules of lending are not often granted when
granting credit abilities of customers
Hi: Some customers do not have the problem of inadequate
collateral securities or the loan requested for.
3 Ho: Counter
–order from superior officers does not influence the lending decision of
lending officers.
1.7 LIMITATION
OF STUDY
The factors that limit the scope of this work can be
categorized into two variables, which is a controlled and uncontrolled
variable. The formal is based on the time with researcher disposals to carry
out the study and financial constraint, while the latter is attributed of the
established under study some staffs treat questionnaires administered with
competent and resentment which at the number of questionnaire that retired,
while some initial information that would have been added to the substance of
the work was not given as it was claimed to be management decision and they
view such facilities.
1.8 CORPORATE
PROFILE OF UNION BANK
The evaluation of the union bank in Nigeria cannot
distinguish from growth in international trade. Before the advert of European,
Nigeria and other west Asia countries had trade link with the worth and East
via the Sahara trade routes.
In 1917, the colonial Bank which started operation in
African in the year 1836, opened branch in Lagos, Zaire and Accra, however in
1925 the colonial bank limited merged with Anglo-Egyptians banks and the
national bank of south Africa to form the Barclays bank D.C.O. Dominion
colonial and overseas.
This was an era when individual could float banks that will
subject only to the provisions of the section 2 (1) of the companies
ordinances, availability of adequate bank capital, windows banking was common
feature since banks poferated at such supervision rate that era could also be
described as a rudimentary banking in Nigeria.
Prior to 1973, the foreigners were the majority shareholders
in Barclay’s banks of Nigeria. Thanks to Nigeria indegenisation decree of 1973,
which no longer allow the establishment of foreign banks with a majority of
foreign interest. In compliance with this decrees the shareholder, Nigeria
owing 28.3% in the year 1997, the Barclays Banking of Nigeria limited, change
its name to Union bank of Nigeria with Barclays bank giving up 22% equity.
Union bank in may 1989, the bank became 100% Nigeria owned
and managed making it the first of the kind among the three biggest banking
systems in Nigeria, section 29 (2) of the companies and allied matter, decree
CAMB 1990, mandated all the public companies in Nigeria limited by shares to
end their name with the worlds public limited company in compliance with this
section and its subsection of this decrees the bank charged from limited to Plc
after it name now bears the union bank of Nigeria plc.
In 1994, at the annual general meeting member approved by a
special resolution to increase the share capital of the bank to N250 million as
new capitals. Union bank of Nigeria plc annual report and account core capital
consist 1 paid up capital statutory and other researcher is now very lose to
the N1 billion banking history and it confirms the bank story position as the
highest enterprises wholly owned and managed by Nigerian among the companies
quoted on the Nigeria stock exchange with over 75years of banking services to
the nation. The bank assets based has risen to N
The bank is the first bank of Nigeria to achieve the N
4.5billion deposit account. The bank has 400 branches nationwide and will filed
overseas branches in London. The bank also has over 12,000 staff strength.
1.9 DEFINITIONS
OF TERMS
MANAGEMENT:- This can be defined as the variability that is
likely to occur in the feature returns of the project.
Management,
This is defined as the process of directing, co-ordination and influencing the
operations of an organization so as to obtain desired result and enhance a
total performance.
RISK:- A business organization that requite and hold deposit
of funds from others, make loans or extends credit and transfer fund by written
order or depositor. The terms occasionally but accurately applied to commercial
banks only because of the peculiar types of services that commercial performs,
they maintain and create demand deposited (checking account which are part of
the nation money supply) a place of business or keeping or lending exchanging
and issuing money.
COMMERCIAL BANKS- These are financial institutions, which
accept deposit and other loans to the customers.
FACULTY:- A bank faculty is any credit services rendered by
a bank. It is distinct from bank services. Bank services included all such
function performed by the banks or example opening a saving account, cashing
cheque, opening a letter credit foreign remittance e.t.c. Bank facilities is a
concession given to trusted customer at times on the pledging of available
credit, credit facilities are not mutually exclusives.
CREDIT:- A transaction between two parties in which one
(creditor or lender) supplier money, goods, securities in returns for a
promised future, payment by the other of debtor borrower. To sell or lend in
the basis of future payment.
MONEY:- This can be defined as anything which passes freely
from hand to hand and is generally acceptable in settlement of debt.
COLLATERAL:- A property pledge as a guarantee of payment or
an obligation or loan.