– Board Characteristics and Risk Management of Listed Deposit Money Banks in Nigeria –
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ABSTRACT
This study has been undertaken with the objective of examining the Characteristics on the Risk management Capacity of listed deposit money banks in .
Using a sample of eight (8) too big to fail banks for a period of 8 years (2005-2012), the study employs correlation research design and Generalized least squares method of analysis.
The study found that board characteristics of the listed deposit money banks in Nigeria have significant impact on the risk management of the banks.
Specifically, the study found that, board of directors’ size and independence, board risk governance and board financial expertise have significantly (measured by Value at risk and non-performing loans ratio) of the deposit money banks in Nigeria. T
he study recommends among others that the regulators of deposit money banks in Nigeria should increase surveillance, and supervision to ensure proper overall risk management that could safeguard the interest of all stakeholders and the reputations of the banks. They should also emphasize the optimal size of the board.
INTRODUCTION
1.1 Background to the Study
The strategic and development of any country makes them attract stringent operational and prudential regulations.
Banks mobilize funds from surplus units of the economy, and channel them to the needy sectors of the economy; they provide the payment and settlement system and implement monetary policy.
It is in this regard that banks are regarded as the central nervous system of any economy (Sunusi, 2012). The sole aim of is to have a sound and efficient financial system that can foster economic growth and development.
However, to achieve the aim of banking system, a sustained is necessary; confidence in this regard refers to peoples’ faith in the banks, that is, the extent to which people generally believe that their money is safe and that the possibility of loss is remote (Emeka, 1997).
According to Cranston (1995), Banks face risk in a variety of situations. He adds that the most serious risk is that of going out of business and that a more frequent risk for banks is that of default by a borrower.
In order for regulators and banks management to safeguard the banking public confidence and improve performance, risk as a concept has been of great concern and enterprise risk management has been established in all jurisdictions around the world, including Nigeria.
REFERENCES
Babatunde, M. A. &OLanaran, O., (2009):“The Effects of Internal and External Mechanisms on Governance and Performance of Corporate Firms in Nigeria”, Corporate Ownership and Control Journal, 7(1), winter 2009.
Basel Committee on Bank Supervision (BCBS), (2004):“International Convergence of Capital Measurement and Capital Standards: A Revised Framework”, In Basel Committee Publications, No 107.
Basel Committee on Banking Supervision, (1997):“Core Principles to Effective Banking Supervision”.
Basel Committee on Banking Supervision, (2008):“Principles for Sound Liquidity Risk Management and Supervision”, Bank for International Settlements, September.
Belkhir, M. (2008):“Board of Directors’ Size and Performance in the Banking Industry”, International Journal of Managerial Finance.
Belkhir, M. (2003):“Board Structure, Ownership Structure, and Firm Performance: Evidence from Banking”, InternationalJournal of Managerial Finance.