THE IMPACT OF RISK MANAGEMENT IN FINANCIAL INSTITUTIONS

Abstract

Customers of the banks expect their bankers to provide them with loans and advances to make up 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 Sector. Questionnaires were distributed to collect the relevant information from the respondents, percentage and chi-square method were employed and hypotheses testing was carried out, it was discovered that there is risk in the bank sector which enabled the researcher 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. It was however recommended that there is need to employ more competent staff to the risk management department.

CHAPTER ONE

INTRODUCTION

1.1   Background to the Study

Banks are germane to economic development through the financial services they provide. Their intermediation role can be said to be a catalyst for economic growth. The efficient and effective performance of the banking industry over time is an index of financial stability in any nation. The extent to which a bank extends their operation to the public for productive activities accelerates the pace of a nation’s economic growth and its long-term sustainability (Kolapo, Ayeni & Oke, 2012). In the 21st century business environment is added multifaceted and intricate than ever. The majority of businesses have to trade with uncertainties and qualms in every dimension of their operations. Without a doubt, in the present-day’s unpredictable and explosive atmosphere all the banks are in front of a hefty risks like: credit risk, liquidity risk, operational risk, market risk, foreign exchange risk, and interest rate risk, along with others risks, which may possibly intimidate the survival and success of the bank’s Corporate Performance. The Nigerian banking industry has been strained by the deteriorating quality of its risk related assets as a result of the significant dip in equity market indices, global oil prices and sudden depreciation of the naira against global currencies.The poor quality of the banks’ loan assets hindered banks to extend more credit to the domestic economy, thereby adversely affecting economic performance. This prompted the Federal Government of Nigeria through the instrumentality of an Act of the National Assembly to establish the Asset Management Corporation of Nigeria (AMCON) in July, 2010 to provide a lasting solution to the recurring problems of non-performing loans that bedeviled Nigerian banks (Kolapo, Ayeni & Oke, 2012).