CHAPTER ONE

1.      1INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Inspite of our numerous national problems, which some times tend to darken our national and individual self esteem, It is universally acknowledged that Nigeria Scholars, Accountants Securities and there Professional have performed most creditably in their respective discipline in the competitive international area to assess the impact of Risk management in Nigeria banking industry.

        The need of a study in the area steems form the fact that through risk management is very important management function will much has done to eliminate or minimize the adverse effects of possible financial loss by

(1)   Identifying all the potential sources of loss

2.      Measuring the Financial consequences of a loss occurring and using control to minimize actual losses or their Financial consequences.

On writing this research work successfully one cannot fail to say what bank is all about because the seesense of this research centres mostly on the nature (impact) of risk management in Nigerian banking industry.

There are many definitions of bank as there are defines.  It is been a here clean attempt overtime to define what s a bank, several school of thoughts, professionals and bodies have made bold attempt to address this issue.  Oxford advanced learner dictionary, Simply defined bank as establishment for keeping money and valuables, safety the money being paid out on customers order.  However, bank could be generally described as a company carrying the business of receiving money and collection of drafts or cheques for customers subjects to obligation of honouring cheque drawn upon then from time to time by the customers to the extent of the amount available on their account or agreed facility.

J.W Gibert also defined bank or a banker as dealer in capital or more properly, a dealer on money.  He is in intermediate party between the borrower and the lender.  He  borrows from one party and lends to another.

Adekanye (1986) united kingdom bills of exchange act 1882 defined bank as a body of persons whether incorporated or not who carry on the business of banking also the bankers, Books evidence Act o 1879 stated what the expression bank and banker mean persons partnership, or Company on the business of bankers and having duty make, or return to the Commissioner of on land revenue and also any savings bank certified under the any post office saving bank of recent, two leading authorities on banking law have attempted to define bank or bank as a place of receiving money and collecting drafts.

Dr. Herbert Hart on his book law of  Banking proffered define that a banker is a person carrying on the business of receiving money and collecting drafts for customers subjects to the obligation of honouring cheque drawn upon them from time to time by the customers to the extent of the amounts available on their current accounts. Paget (1961) defined a bank as a corporation or persons who accept money on current accounts pays cheques on such accounts or demand and Collected chequed for customers.

From the about definitions none of them is encompassing, comprehensive and compete.   The corollary of the above definitions is that unless you duty wholly r partially is that of receiving money for credit off a current, from which depositors might withdrawn on demand by cheques, that person corporation on establishments is not a banker.

However 1969 banking act of Nigeria defined banking as the business of receiving money from outside, sources and deposits irrespective of the payment of interest and the granting of money loan and acceptance of credits.

The purchase of bills and cheques are sales of  securities for the accounts of others of the incurring of the obligation to acquire claims in resect of loans prior to their maturity in, or the assumption of quaranteen and other warrantees for others or the effecting of transfers and clearings, others transactions as the Commissioner may on the recommendation of the central banking by order published on the Federal government agzette designated as banking business.

From the above, it can been seen that  unless the principal or substantial part of the business consisted of receiving money for the  credit of the customer which the deposition must withdrawn on demand by cheque an establishment would not come within  the definition.

Nevertheless, the bank role on the present day financial intermediation is for beyond that given  by our past defines for the  purpose of this work, references on the bank is he function could be drawn mainly or risk related activities.

Banks therefore, generally perform a key function  of reducing risk of financial transaction of their customers who placed  funds with them and borrowers who are enabled to have the uses of these funds.  To survive bank it must develop strategies effective enough to cope with the risks inherent in financial intermadition and other of both physical and more nature prevalent in banking and Nigeria economic environment the ability of the banking to perform its tasks efficiently and on harmony with there needs of  the public and economic goods set by the monetary authorities depends to a large extent in efficient and effective management of Risk inherent on the sector.

Risk may be defined here as uncertainty concerning loss and loss itself represents the unintentional decline in disappearance of value arising from a contingency NEHR AND CANMACK (1980).

It is pertinent at this juncture to give a brief background information about Afribank Nigeria Plc, the bank on its legal from commenced operation on 4th January 1960 was incorporated as a private limited liability company on 30th May 1969 and was converted to a public company on 7th October 1992.  The companys here are currently quoted on the Nigeria Stock exchange. The principal activities of the Company is engaged on the Commercial Banking business.