Tag Archives: financial stability

Operational Risk Management and Financial Stability of Deposit Money Banks in Nigeria (Published)

The series of financial crisis that have been experienced in both the developed and developing countries showed the importance of having well-functioning financial systems as financial crises directly affect the health of a country’s economy. Many banks had collapsed or experienced serious financial constraints both in Nigeria and the rest of the world due to their continuous exposure to severe operational risk events and fraudulent actions and these have continued to be major threat to the banks. This study investigated the effect of operational risk management on financial stability of deposit money banks in NigeriaThe study employed ex-post facto research design. The population comprised twenty-two licensed deposit money banks in Nigeria as at September 30th, 2018. A total sample of eleven deposit money banks were selected using convenient sampling method and data covering 2009 to 2018 were sourced from the audited and published financial statements of these sampled deposit money banks. Certification of the financial statements by external auditors and regulators and the approval by the board of directors confirm the reliability of the data. Data were analysed using descriptive and inferential statistics.The results showed that operational risk management had negative significant relationship with financial stability of the selected banks in Nigeria (F(3,106)= 24.46, Adj. R2= 0.4091, p < 0.05). Specifically, Non-performing loan to total loan ratio, cost to income ratio and total loan and advances to total deposit ratio have significant relationship on the variables of financial stability of deposit money banks in Nigeria proxied by Capital Adequacy Ratio (F(3,106)= 18.23, Adj. R2= 0.316, p < 0.05), Return on Equity (F(3,106)= 22.52,  Adj. R2= 0.389, p < 0.05) and Liquidity Ratio (F(3,106)= 22.45, Adj. R2= 0.389, p < 0.05)The study concluded that operational risk management influences the financial stability of selected deposit money banks in Nigeria. The study recommended, among others, that banks should improve their operational risk management practices and policies in order to maintain sound capital adequacy and sustainable financial stability.

Keywords: Capital Adequacy Ratio, Deposit Money Banks, Liquidity Ratio, Non-Performing Loans, Return on Equity, cost to income ratio, financial stability, operational risk management

Credit Risk Management and Financial Stability in Quoted Deposit Money Banks in Nigeria (Published)

In the history of development of the Nigerian banking industry, it is evident that most of the failures experienced within the industry prior to the consolidation era were as a result of financial dampening that finally led to bad loans and some other unethical factors and financial stability has generated the ever-increasing attention and interest in academic and banking sector in Nigeria. This study examined the effect of credit risk management on financial stability of deposit money banks in Nigeria; specifically assessing the relationship between credit risk management and financial stability and establishing the level of credit risk measures to be put in place to ensure financial stability of deposit money banks in Nigeria. The study adopted ex-post facto research design. The target population comprised of 22 deposit money banks in Nigeria licensed by the Central Bank of Nigeria as at November 30th, 2018 from which 10 deposit money banks were purposively selected. Data were sourced from the audited and published financial statements of the selected deposit money banks. The data were validated by the statutory auditors. Descriptive and inferential statistics (multiple regression) were used to analyze the result. The findings revealed that asset quality represented by non-performing loan to gross loan ratio (NLPR), Total risk Asset to total asset ratio (TRAR), Loan Loss Provision to total loan ratio (LLPR) and Total Loan to total deposit ratio (TLDR), all had a significant effect on the variables of Financial Stability which are; Debt-to-Shareholders Fund F (99)=11.17, Adj. R2= 0.2419, p < 0.10, Capital Adequacy Ratio F(99) = 20.77, Adj. R2= 0.0490, p < 0.10, Fixed Deposit Cover F(99) = 8.95, Adj. R2= 0.165, p < 0.10 and had joint insignificant effect on Liquidity Ratio F(99)=1.31, Adj. R2= 0.486, p> 0.10 of deposit money banks in Nigeria. The study concluded that credit risk management influenced financial stability of quoted deposit money banks in Nigeria. The study recommended that operators of banks, should pay more attention to those variables of credit risk management in order to improve financial stability by managing credit risk that deposit money banks are facing to improve financial stability and to put in place proper credit management policy to mitigate credit risk and to also improve the knowledge of credit management policy in financial institutions.

Keywords: Credit Risk Management, Deposit Money Banks, Non-Performing Loans, credit management policy, financial stability

Corporate Governance and Financial Stability of Nigeria Quoted Deposit Money Banks (Published)

The development in corporate governance and the practice play important role in developing and enhancing the global economy, business firms and improving financial stability of deposit money banks. The rising of non-performing loans, decline in asset quality, credit concentration and high foreign exchange exposure and volatility have led to financial instability and financial distress in deposit money banks in Nigeria. The study examined the effect of corporate governance on the financial stability of deposit money banks in Nigeria. Ex-post facto research design was adopted for the study. The population of the study comprised the 21 listed deposit banks on the Nigerian stock exchange as at September 2016. The study made use of a total of 10 banks as sample size which was categorized under the listed deposit money banks in Nigeria. These banks were selected using stratified sampling technique. Data were collected from the annual reports for the period of ten years (2007-2016). Descriptive Statistics test were carried out, hausman test and cross-section random effect test were analyzed. The analysis revealed that all corporate governance variables have a positive and negative effect on capital adequacy at Adj.R2 = 0.052 and F test score of 2.832, capital structure at Adj.R2 = 0.088 and F test score of 4.187, and liquidity at Adj.R2 = 0.004 and F test score of 1.149. Corporate governance has a positive and negative effect on financial stability with P-value of F statistics at 0.000 and Adjusted R= 12.9%. The study concluded that corporate governance has a significant effect on financial stability. This means that as the content of corporate governance improves financial stability increases. The study recommended that to increase financial stability, management should focus on ensuring that there is effective corporate governance in the organization. 

Keywords: Corporate Governance, Volatility, capital adequacy, capital structure and liquidity, financial stability