Management of liquidity as a tool for viability and profitability is necessary in Banking industry to meet up customers demand and obligation financial and legal reserve requirement, gain the confidence of investors and the public at large.
Banking has a always been the act of borrowing out short and long terms even the Goldsmiths and silversmiths, the borrowing of short and long terms is essential to the growth of business in the process however, liquidity risk is incurred. This arises four the obvious inevitable mismatch therefore adequate liquidity is required to mange the risk.
Achieving liquidity was once a simple matter of selling short term assets. Today, for many big banks, it is primarily a matter of managing the maturity structure and the liability portfolio and issuing new debt to meet increments funding needs.
The purpose of this project is to see how effective and efficient management of bank liquidity lead to viability and profitability.
1.1 BACKGROUND OF THE STUDY
Liquidity is the ability to mobilize cash or convert an into cash with minimum delay and minimum loss. Virtually, all-economic units, including banks needs liquidity, banks must maintain a substantial part of their assets in cash and in assets but can be converted into cash quickly.
How much liquidity to hold and in what forms to hold it have been line major areas of management decision in meeting their liquidity needs. Banks have wide latitude in asset management and in recent years have begun to use the attraction of liabilities to assist in this task.
The problem of liquidity for commercial banks is essentially that of having available at all times sufficient funds to meet the demands for money that may be made on them. Banks are required by law to comply with legal reserves requirements and in addition they need liquidity to meet all legitimate loan demands and deposit with drawls liquidity is also needed to take advantage of an expected profit opportunities (Speculative purposes) and for unforeseen contingencies or emergencies liquidity can also be defined as a bank ability, not only to meet possible withdrawals but also to provide for legitimate credit needs of its customers and the community or public.
If the liquidity of any bank is property managed, it will keep the business of the bank a float (having enough money to operate or stay out of debt) at all times as finance is the bed rock of every organization of recent, there have been cases of bank failmes, which have been occasioned by the neckless liquidity management on the part of the management of such banks. From the above scenario, it is also clear that an effective and efficient liquidity management can lead to viability and profitability.
This study had become necessary because the researcher feels that there is no adequate liquidity management in the banking sector. Liquidity forms an essential part of any organization and as such to ensure operating efficiency on any bank, the level of fund (Liquidity) should be kept so that any time there is sufficient fund/cash to meet the customers needs should be determined and set.
Hence, the management of this fund is of prime importance in the life of any bank. These fialmes of Banks have made bank customers to lose faith/confidence in the banks, we know the banking industry is a very important sector of nay economy. A bank can be said to doing well if it is visible and profitable this can only be made possible. If its liquidity is well managed.
1.2 STATEMENT OF THE PROBLEM
Many banks have failed due to many reasons. The most apparent of these reason is poor liquidity management tit is obvious that due to the establishment of many banks, throng hands or inefficient and inexperienced managers and staffs have found them selves in the banking industry/sector. The question that bother these researchers is how bank can effectively and efficiently manage their liquidity (fund) for viability and profitability.