Problem Facing Commercial Banks
(A Case Study Of Union Banks Of Nigeria United Banks For African And African Bank)
Commercial banks face a myriad of challenges in today’s dynamic financial landscape. Regulatory compliance remains a significant hurdle, with stringent measures aimed at ensuring financial stability and consumer protection. Additionally, technological advancements have transformed the banking sector, necessitating substantial investments in digital infrastructure to keep pace with evolving customer preferences and cybersecurity threats. Economic volatility, characterized by fluctuating interest rates and market uncertainties, poses risks to banks’ profitability and asset quality. Moreover, competition from non-traditional financial institutions, such as fintech firms, challenges banks to innovate and adapt their business models to remain competitive. Customer expectations for personalized services further add pressure on banks to enhance customer experience while balancing cost efficiency. In navigating these challenges, commercial banks must adopt strategic approaches that encompass regulatory compliance, technology integration, risk management, and customer-centric strategies to thrive in the ever-changing banking landscape.
Commercial banks in Nigeria have been facing a of problem. These problem ranges from integrity factors location factor technological factor unstable management incompleteness of board members and unqualified personnel.
Therefore this study was aimed at looking into these problems so as to ascertain the impact on commercial banks as well as suggesting the possible ways of eliminating these problems. The researcher used three commercial banks for effective analysis namely union bank of Nigeria united bank of African and Afric bank.
In order to be arrive at a conclusion decision interviews literature review and personal observation were employed as the means of data collection. The three banks used were fund to be having almost the same basic problems even though some were bigger bank than others mismanagement politician instability and government interference in the daily affairs of banks were seen as problem to all commercial banks.
By way conclusion suggestion on how these problems can be prevented in the future were made. One of these suggestions is by including professional who are competent in the field of banking. Another is that government should minimize its interference in he activities of the commercial banks
Title page
Approval page
Dedication
Acknowledgement
Abstract
Table of content
CHAPTER ONE
INTRODUCTION
1.1 Statement of problems
1.2 Purpose of study
1.3 Significance of the study
1.4 Scope of the study
1.5 Limitation of study
1.6 Definition of terms
1.7 Statement of hypothesis
CHAPTER TWO
2.0 Review of related literature
2.1 Definition of commercial bank
2.2 Functions of Nigeria commercial bank
2.3 Ways of regulating the activities
CHAPTER THREE
3.0 RESEARCH DESIGN AND METHODOLOGY
3.1 Sources of data
3.2 Primary and secondary sources of data
3.3 Sample used
3.4 Method of investigation
CHAPTER FOUR
4.0 Data presentation and analysis
4.1 Data presentation and analysis
4.2 Test hypothesis
CHAPTER FIVE
5.0 Summary of finding conclusion and recommendation
5.1 Findings
5.2 Conclusion
5.3 Recommendation
5.4 Bibliography
INTRODUCTION
The problems of commercial banks in Nigeria is the topic of this research project. Some commercial banks in Nigeria are owned by government some by individual and other by a combination of both the government and individuals. Individuals establish banks for the purpose of making profit and to initiate business opportunity where they are available. Organizations on he other hand establish banks for profit making and probably to and business governments establish banks merely for development purpose.
In recent time it has been the vogue for banks to be ridiculed and criticized for one reason or the other. These criticisms have emanated both from official and unofficial quarters and now tend towards a climax.
Commercial banks in Nigeria and other countries are established to carry out the following functions it deals in money and financial service provide efficient system for making payment to settle business and personal transaction provide safekeeping for customers money and valuables provide funds for production or consumers need convention of funds into assets.
The Central Bank of Nigeria (CNB) is the apex bank. It performs the major role of monetary management through the issuance of annual monetary policy circular to banks.
So commercial banks are faced with problems because the polices from the CBN are not always carefully through out. These failures are due to the fact that the right questions, to problems of banks are matter asked nor right answers obtained. Some people attributed the problem of banks to their inability to match funds. In other words the banks refuse to marry the duration for which deposits are placed with them with the duration from which they place funds with other banks. Other argues that some of the banks reduce the portfolio of loan and advance while increasing investment.
All these allegation leveled on these banks come from the management teams of banks in Nigeria. The problems of commercial banks were formerly attributed to a regulatory body like central bank of Nigeria (CBN) in experienced personnel and inadequate capital base were also of the problem. In recent time we have a regulatory body (CBN) finance house experience in the society but still management teams and board of directors cause major problems in banking sector.
Banks face other problems such as integrity factor location factor and technological factor among other. There also exist conflict of objective in the commercial banks. He political instability and the global economic recess affected the commercial banks negatively.
STATEMENT OF THE PROBLEM
In Nigeria today the incidence of distress in the banking sector is not more surprise news to the general public. The causes and the factors responsible for the distress are numerous. Every body tries to clip in this own ideal of the causes of the malaise in banking but there has never been a solution to the problem. This research therefore tends to find out the factors responsible for the problem in Nigeria commercial bank. This paper is aimed at identifying the problems associated with commercial banks using united banks for Africa (UBA) and African bank. The paper will find out how he board of director with the management team brings problem to banks as well a he effect of integrity location and technological factors and government interference on bank.
This paper promises an overhaul of the commercial banking system, which involves default forgeries frauds and destruct.
PURPOSE OF STUDY
This work aims at investigating the problems which commercial banks in Nigeria face with a view to ascertaining how for the commercial banks have been fanny as regards these problems and to recommended appropriate remedies that would minimize the problems. It is also an attempt to suggest ways in which these problems can be avoided in the futures taking into consideration the adage that say “prevention is better than cure”
In other word the researcher intends to examine the roles performed by the commercial banks and to carry the necessary evaluation.
SIGNIFICANCE OF THE STUDY
This work will be of immeasurable worth to the banks, as it will show how far they have been coping a part from suggesting solution to these problems facing them.
It will be useful to individuals and government who may wish to go into banking business in knowing and taking connective measure in commercial banks business.
Finally this research work will serve as an addition to the existing literature in the area of banking finance and policy programme to enhance economic development of the country and the world large. Besides it will serve as reference for future researchers on the field.
STATEMENT OF SUB PROBLEM
The research is meant to address the following research question.
1. Do the incompetence of the board of director and the management team bring problem to the bank?
2. Do the political instability and the global economic recess affect the commercial bank?
3. Do flouting of he ethic of profession affects the commercial banks?
4. Integrity location factor and technological factor affect the commercial bank?
There are the questions affects by the research
STATEMENT OF HYPOTHESIS
Null (H0) and alternative (H1) Hypothesis
A null hypothesis is one which state that there is no difference between two situation that are being compared and can therefore be disapproved by an alternative observation which is the best way of setting up a hypothesis the alternative hypothesis with be accepted.
The following assumptions are made which have to be proved in the course of the study.
H0: There are no problems facing commercial banks in Nigeria.
H1: There are problems facing commercial banks in Nigeria.
SCOPE AND LIMITATION OF THE STUDY
The united bank for African and African bank of Nigeria they are the banks this research is carried out.
This work faced some problems of getting the appropriate officers of the banks visited. Most managers were not on seat or were busy to attend to customers and had very litter time to talk a researcher.
The research was also limited by the unwilling of managers or officers to disclose important information do the project.
Finance was not to be left out this type of study requires adequate money and time to enable the researcher obtain necessary data. In view of the current economic difficulties in the country this problem was thus evident in view of all these problems the researcher aim of study was achieved.
DEFINITION OF TERMS
a. Valuable: Worth a lot of money.
b. Monetization: To give cash obtained or being give out in an economy.
c. Liquidation: Act winding up a bank because of the
d. Distress: The state of being in danger or difficulty and needing help.
e. Portfolio: A set of investments owned by person bank
f. Fraud: Criminal deception
g. Central bank: Is usually a government owned bank, which help to control and supervisor the entire monetary and financial system of a country.
Deposit: Money in custody of bank the amount paid by customer on first instatement.
Problem Facing Commercial Banks:
Commercial banks, like any other businesses, face a variety of challenges. These challenges can vary depending on the economic and regulatory environment, technological advancements, and market conditions. Here are some common problems that commercial banks typically face:
- Regulatory Compliance: Banks are subject to a myriad of regulations aimed at ensuring financial stability and protecting consumers. Staying compliant with these regulations can be complex and costly.
- Cybersecurity: With the increasing reliance on digital technologies, banks are vulnerable to cyberattacks. Protecting customer data and financial systems from breaches is a constant challenge.
- Low Interest Rates: Persistently low-interest rates can squeeze banks’ net interest margins, impacting their profitability. This has become a significant issue in many countries following the global financial crisis.
- Fintech Competition: The rise of fintech companies has introduced new competition. These startups often offer innovative, customer-friendly financial services, challenging traditional banks’ market share.
- Changing Customer Expectations: Customers now expect seamless, digital banking experiences. Meeting these expectations requires significant investments in technology and customer service.
- Credit Risk: Managing credit risk is a core function for banks. Economic downturns can lead to an increase in loan defaults, impacting the bank’s balance sheet.
- Operational Efficiency: Banks need to constantly streamline their operations to cut costs and remain competitive. Legacy systems can be cumbersome to update.
- Capital Adequacy: Banks must maintain sufficient capital to absorb losses. This is mandated by regulatory bodies and helps ensure financial stability but can be challenging during economic downturns.
- Global Economic Uncertainty: Banks often operate in multiple countries, making them vulnerable to economic fluctuations and geopolitical instability.
- Sustainability and ESG (Environmental, Social, and Governance) Concerns: Banks are under increasing pressure to align their operations and investments with sustainability goals, which can require changes in their lending practices and investments.
- Demographic Shifts: An aging population in many countries can affect the demand for banking services, such as retirement planning and wealth management.
- Market Volatility: Banks with significant trading operations can be affected by market fluctuations, which can impact their trading revenues and asset valuations.
- Geopolitical Risk: International banks can be impacted by changes in international relations, sanctions, and trade disputes.
- Innovation and Technology Adoption: Keeping up with rapidly evolving technology is a constant challenge. Banks must invest in innovation to stay competitive.
- Financial Inclusion: Banks also face pressure to ensure that financial services are accessible to all segments of the population, including those in underserved or remote areas.
- Brand Reputation: Trust is paramount in banking. Any scandal, whether related to financial impropriety or data breaches, can significantly damage a bank’s reputation.
To navigate these challenges successfully, commercial banks need to be adaptive, invest in technology, have a robust risk management framework, and stay attuned to the changing needs and expectations of their customers and the broader financial environment.