BANK DISTRESS AND ITS RESOLUTION OPTIONS [THE NIGERIAN EXPERIENCE]
BANK DISTRESS AND ITS RESOLUTION OPTIONS [THE NIGERIAN EXPERIENCE]
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Date
1999
Authors
OKONTA, DIANA OKWUY
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Abstract
This study attempts to examine the problem of distress and the resolution options used
in dealing with the problem in the Nigerian banking system.The study identified the
causes of distress in the Nigerian banking industry to include Inhibiting Policy
environment; capital inadequacy; management problems; ownership structure/pervasive
influences among others. It also discovered that the level of distress in the Nigerian
banking system kept increasing at an alarming rate despite the efforts made by
government to address it. Some of the resolution measures used in dealing with the
distress problem include establishment of legal frameworks (CBN decree 24 of 1991,
BOFI decree 25 of 1991 and NDIC decree 22 of 1988), moral suasion,imposition of
Holding Actions, financial assistance, supervisory intervention, change of management,
suspension of banking license and liquidation of distressed banks.The study also found
the existing distress framework to be ineffective in addressing the problems of banks
because of inadequate resources for failure resolution,ineffectiveness of Holding Actions.
The study therefore concludes that the ineffectiveness of the existing distress resolution
framework can be attributed to the inadequacies and lapses inherent in the existing
operational framework.
The researcher recommends substantive reforms on bank distress resolution options,
which should include: measures that will minimize the undesirable effects of Holding
actions; the need to set aside financial resources to handle bank distress; increased
supervisory capacity; distribution of failure losses during liquidation and restructuring
of other sub-sectors of financial services industry.
Description
MBA
Keywords
BANK DISTRESS,, RESOLUTION,, OPTIONS,, NIGERIAN,, EXPERIENCE