In recent times, the global instability that experienced in the financial system and banking sub-sector in particular was as a result of institutional failures. Consequently, banking experts in Nigeria said that, the failure of the two banks was an enough signal to the Nigeria banking industry. Therefore, the study examined the collapse of Lehman Brothers and Merril Lynch as a rethink lesson for the Nigerian Banks. However, the study reveals that the two banks were absolutely limiting to the size and age in determining the future of their banks instead of depending on the efficiency and effective management of risky assets. Also the conventional lending procedures were not instituted rather they depend on subprime mortgage arrangement that did not have collateral securities. The declining home prices had made refinancing more difficult as a result of inadequate innovations in securitization. We therefore, recommend that the regulatory bodies should not be over confident on the conventional tools of banking supervision rather they employ more non-conventional methods of obtaining insider information. The current crops of bankers should closely be monitored to avoid manipulation as could be seen from the consolidation exercise. CBN should have full autonomy to run the finance market efficiently. Finally, government should also allow CBN to have the air of confidence in discharging its responsibilities.
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