CHAPTER ONE INTRODUCTION

1.1     STATEMENT OF PROBLEM AND PURPOSE OF THE STUDY

Banking inspection and examination as an aid to effective bank management.  Banking inspection and examination is the act of monitoring human and non-human resources in the banking industry in order to make sure that the objectives and goals of the bank are achieved and there is proper record of account.

The aim of this study is to investigate how banking inspection and examination will help banks to solve the problem of bad and doubtful debts in the banking industry.

1.2RATIONALE OF THE STUDY

The following are the reasons for this study:-

1.                 To ascertain the extent to which banking inspection has helped in creating job security to its bank employees.

2.                 To examine the number of bad debt resulting from loans given to customers that have not been recovered and provision made for prevention.

3.                 To find out the extent to which banking inspection had made provision for job security in the bank with a view to solving problem.

4.                 It is hoped that banks will take advantages of the suggestions from this work to embrace commitment and objective reporting for accurate record keeping.

5.                 To examine the inspection and examination techniques in the banks.

1.3SIGNIFICANCE OF THE STUDY

The significance of banking inspection and examination cannot be over emphasized.  This is because inspection and examination is the only weapon banks can use to rectify and solve the problem of bad debt so as to avoid liquidation and thereby affecting the growth and development of the country.

The people that will benefit from this study are banks as it will help workers to observe policies and procedures of the banking ethics to strengthen the job security of staff for efficiency growth and development restructure.

The result of this study or work may help create the awareness required for effective and efficient auditing of the banks on a regular basis.

Business organizations and companies will also benefit from this work.

1.4BACKGROUND OF STUDY

Section 61 of the Banking and Other Financial Institutions Decree No. 25 of 1991 (BOFID) defined banking business as the business of receiving deposits on current account, savings account or other similar account, paying or collecting cheques, drawn by or paid in by customers, provision of finance or such other business as the governor of Central Bank may by order published in the gazette designate as banking business.  The Nigeria banking system is made up of Central, Commercial, Merchants and Development Banks.  There are also the peoples bank and community banks recently developed or established by decree of the Federal Military Government. 

Banking as a profession has existed for many decades but unfortunately, there was no general accepted statutory definition of a bank until 1969.  Section 41 described bank as a person or company carry on the business of receiving monies and collecting draft for customers subject to the obligation of honouring cheques drawn upon extent of the amounts available on their current account.

Generally bank plays vital roles in the development of any nations.  The banking industry occupies a central position within the setting of any nation’s economy.  Therefore, the failure of banks may lead to control the activities of the banks to enhance effective development.

The banks are monitored and regulated by the government through its agency -the Central Bank of Nigeria.  This is to ensure that they render services to their customer in a manner consistent with safekeeping operation and government financial policy.  They also control their loans and advances and investing activities as these affect the freedom and ability of these banks to make profits.  The credit guidelines issued by the monetary authorities have not been obeyed by banks as they pursue highly profitable business venture even when such meant exceeding their credit capacity.  The problem of not abiding with the credit guiding equally made it relatively impossible to achieve their goals of effective economic development industry.

Based on the above factors, the research is motivated to examine the extent to which inspectorate of banks are contributing to the efficient management of the banks resources.

1.5DEFINITION OF TERMS

1.       LOANS:     These are income generated by borrowing from private individuals, banks or from foreign countries to finance a project.

2.       GUARANTEES:This is a written promise made by one person called the guarantor or surely to be collaterally answerable for the debt, default or miscarriage of another person called the principal debtor.

3.       ACCEPTANCE:This is defined as a draft by one party and acknowledged by a second party.  The drawer who is also the accepter stamps or writes the word “accepted” on the face of the instrument and the place and the date of payment.

4.       BANK EXAMINATION:       Is an on-site investigation of the banks financial conditions, management and policies by representatives (bank examines) of the regulatory agencies.