SURVIVAL OF BANKS IN A DEPRESSED ECONOMY

Website Review / Human Resources


SURVIVAL OF BANKS IN A DEPRESSED ECONOMY
Alban Onwuliri , Other, Nigeria

Ultimately, the challenge is about survival.



SURVIVAL OF BANKS IN A DEPRESSED

ECONOMY
By:
ALBAN NDUKWU C. ONWULIRI, FCIB

BEING A PAPER PRESENTED AT A SEMINAR ORGANISED BY:
BANKING & FINANCE STUDENTS, UNIVERSITY OF PORT HARCOURT
ACKNOWLEDGEMENT
THE AUTHOR IS GRATEFUL TO ADOLPHUS J. TOBY, PhD - LECTURER IN BANKING AND FINANCE AT THE RIVERS STATE UNIVERSITY OF SCIENCE AND TECHNOLOGY PORT HARCOURT FOR PROVIDING SOME OF HIS PUBLISHED ARTICLES THAT ASSISTED ME IN PREPARING THIS MANUSCRIPT.
INTRODUCTION
With the present economic restructuring being undertaken by government, a lot of business outfits especially banks must have in one way or the other been shocked by unexpected policy pronouncements. Nwankwo (1989) calls it economic violence and describes the situation as follows:
‘Patterns of violent economic behaviour have been common in Nigeria and deserve some analysis. In general, violent bahaviour, economic or otherwise derives from harsh environment particularly reflecting the failure of society and pointedly, its leadership to provide enough opportunities for individuals and groups to realise their genuine and legitimate aspirations’
The consequent shifts in bank’s assets and liabilities portfolio, the increasing proportion of rate sensitive components of assets and liabilities, growing interest elasticity of balance sheet items, and the uncertainty in the regulatory environments, all mean that banks’ strategic planners will need to evolve new ways of shielding their balance sheets from regulatory attacks. Traditionally, we all know that the target of regulation in the financial services industry is the balance sheets of commercial and merchant banks.
The consequences of the changes in the dimensional characteristics of the playing field are reflected in the form and structure of banks’ balance sheets.
A characteristic of the present phase of developments in the industry is that while many banks feel threatened by the challenges and are struggling hard to cope with yesterday’s opportunities, the stars of the industry are comfortably exploiting the opportunities in the market place buttressing the fact that banking is not an every comer’s trade.
Size and age, as prominent examples have shown, are by no means the key to success. Similarly, the qualities that separate a good bank from a great bank also have nothing to do with age or size. As competition and market dynamics deepen, the quality of resources required by different activities to remain competitive increases. Intense competition will definitely reduce banks and some will be forced to take on more risks to achieve reasonable margins. In the era of erratic interest rate regulation, banks will find their net interest margin becoming volatile and will therefore appreciate the need to beef up their fee earning services and products. All these are very likely to put a premium on the quality of management, closely followed by professional marketing expertise. Economic history books will mark the Structuring Adjustment period as the watershed years in Nigeria banking environment: a time of swift and brutal changes.
With the impending review of the financial system, only very few banks might be able to turn today’s challenges into tomorrow’s profits.


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