ABSTRACT
Banking supervision is an essential aspect of modern financial system, seeking crucially to monitor risk – taking by banks so as to protect depositors, the government safety net and the economy as a whole against systemic bank failure and its consequences. In this context, this paper seeks to explore the relationship between risk indicators for individual banks and the different approaches to banking supervision adopted around the world. This is the first work to make use of the currently available cross section series data on bank supervision from the World Bank to carry out empirical investigations in a panel data framework, gaining all the advantages in increased efficiency and information that comes from estimations combining longer time series and a wide range of countries. We find wide – ranging effects of design features of banking supervision on risk taking which raise important policies.
TABLE OF CONTENTS
Title…………………………………………………………………………..….i
Approval…………………………………………………………………..……ii
Dedication………………………………………………………………..…….iii
Acknowledgements…..…………………………………………………….…iv
Abstract………………………………………………………………….……..v
Table of Contents……………………………………………………………..vi
Chapter One: Introduction
1.1 Background of the Study………………………………………………..1
1.2 Statement of the Problem………………………………………….…….3
1.3 Objective of the Study…………………………………………….…..…4
1.4 Research Questions…………………………………………………….…4
1.5 Significance of the Study……………………………………..…………5
1.6 Research Hypothesis…………………………………………………..…6
1.7 Scope of the Study……………………………………………………….6
1.8 Definition of Terms……………………………………………………..…6
Chapter Two: Literature review
2.1 Concept and Purpose of Supervision in Bank…………………………8
2.2 Organization and Management of Supervision in Banking Industry…13
2.3 Developing Effectiveness in Supervision……………………………….14
2.4 Frauds amount to inspection……………………………………………..16
2.5 Theories of Bank Supervision…………………………………………….17
2.6 Structures of Supervision…………………………………………………19
2.7 The Basel Accord and Banking Supervision…………………………25
2.8 Recent Research into the Effectiveness of Banking Supervision…26
2.9 Summary of the Related Literature Review……………………………32
Chapter Three: Research Methodology
3.1 Research Design…………………………………………………………..33
3.2 Population of the Study…………………………………………………..34
3.3 Sample and Sampling Techniques………………………………………34
3.4 Sources of Data Collection………………………………………………36
3.5 Method of Data Collection……………………………………………….36
3.6 Procedure for Data Analysis…………………………………………….38
3.7 Validity of Research Instrument…………………………………………39
Chapter Four: Data Analysis and Presentation of Result
4.1 Data analysis………………………………………………………………40
4.2 Summary / result of findings……………………………………………44
Chapter Five: Summary of Findings, Conclusion and Recommendation
5.1 Summary of Findings……………………………………………………..45
5.2 Conclusion………………………………………………………………….46
5.3 Recommendations of the Study…………………………………………47
References……………………………………………………………………….48
Appendix…………………………………………………………………………..49
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The banking act of 1969 defined banking business as the business of receiving money from outside resources as deposits irrespective of the payment or interest and the granting of money, loan and cheques, or the purchase and sales of securities for account for other or the incurring of the obligation to acquire claim in respect of loans prior to their maturity or the assumption of guarantee and other warranties for others.
The 1980s and early 1990s were undoubtedly a period of greater stress and turmoil for United States financial institutions than any other since the Great depression. Over this period more than 1,600 commercial and savings banks insured by the federal deposit insurance corporation (FDIC) were closed or received federal deposit insurance corporation financial assistance. As a consequence, the bank regulatory system came under intense scrutiny and fundamental questions were raised about its effectiveness in anticipating and limiting the number of bank failures and losses to the deposit insurance fund.
Effective supervision can be achieved in two ways.
Problem can be recognized early, so that corrective measures can be taken and the bank returned to a healthy condition, and
Supervision can limit losses by closely monitoring troubled institutions, limiting their incentives to take excessive risks, and ensuring their prompt closure when they become insolvent or when their capital falls below some critical level.
The central bank of Nigeria’s objective and goals of banking inspection and examination on effective banking system are:
To provide adequate banking services in all parts of the country, to develop a sound banking system, to promote rapid economic development throughout the country and to protect depositor and creditors of the banks.
The bank examination department of the central bank of Nigeria was created by sec 20 of the banking Act (1969). The power of the banking act includes:
Assessment of the adequate capital structure in relation to the size of the business, the appraised of the management with special attention to competence and general effectiveness and appraisal of the system of operation procedure and control.
At the level of each bank (commercial merchant, etc.) a system of inspection and control exist to ensure that these guideline are followed and also ensure that loans are not undiscriminating issue by manager. By so doing, the interest of the staff as well as the owners of such banks are also protected.
1.2 STATEMENT OF THE PROBLEM
The problem relating to the inspection and examination of banks include the following:
Non-protection of the bank depositors and creditors interest, lack of fraud prevention and determination in banking institutions as a result of poor inspection and examination, non compliance by bank manager with central bank of Nigeria and other government regulations on granting loans and ineffective banking management caused by excess banking inspection and examination.
With the stated problems above, the regulation and inspection of the bank will always persist due to lack of proper attention to these problem. If the government could regulate or comply to the granting of loans, the excess banking inspection and examination will be reduced.
1.3 OBJECTIVE OF THE STUDY
The objective of this study is to ensure that solutions are being resolved out in the inspection and examination of banks. The following will help to ensure whether the objective of the study is being achieved.
To determine how bank inspection and examination can be of effectiveness in bank management
To determine whether the bank inspection and examination has helped in the prevention and detection of fraud
