The Effect Of Banking Regulation And Reserve On The Performance Of Commercial Bank (a Case Study Of Union Bank)

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The Effect Of Banking Regulation And Reserve On The Performance Of Commercial Bank (a Case Study Of Union Bank)


Commercial Bank It was in the year 1892 that banking activities first started in Nigeria with the opening of a branch of the African Banking corporation in Lagos. It is in the light of these that this work has attempted to showcases the effects of banking regulations and reserves on the performance of commercial banks.  The objective was to access the effects of banking regulation and reserves on the performance of commercial banks in Enugu Urban. Help the aeration of commercial banking that can facilitate, mobilize and channel savings for economic growth. Use the monetary policy to regulate the operation of commercial banking. Control and management of distress and failing banks opinions were sampled through questionnaire, structure interview and primary and secondary data obtained respectively.  The data gathered were analyses and hypothesis tested.  Findings were made which include that.

Regulation and reserves requirements have positive impact on the Nigeria economy. The commercial banks are responding favorably to the banking regulation and reserve. Recommendation were made which include that; it is necessary to secure appropriate treatment of banking regulations reserves to enable it to be publicized and also to collaborate with other regulations of the financial system.



1.0       Introduction

1.1       Statement of problem

1.2       Purpose of the study

1.3       Significance of the study

1.4       Statement of hypothesis

1.5       Scope of the study

1.6       Limitations of the study

1.7              Definition of terms


2.0       Review of relation literature

2.1       West African Currency Board (WACB)

2.2       Concept of central banking

2.3       The central bank of Nigeria

2.4       The free banking Era

2.5       The banking ordinance of 1952

2.6       Central bank of Nigeria’s objectives

2.7       Operations of the central bank of Nigeria

2.8       Traditional functions (Banking functions)

2.9       Method of regulation

2.10     Traditional instruments of monetary policy

2.11     Direct control of bank liquidity

2.12     Direct control of bank advances

2.13     Effect of regulation on commercial banks


3.0       Research methodology and design

3.1       Source of data

3.2       Primary source

3.3       Secondary source

3.4       Sample and sampling techniques

3.5       Method of investigation: method of data presentation

3.6       Method of data analysis


4.0       Data presentation and analysis

4.1       Data presentation

4.2       Analysis of data

4.3       Test of hypothesis


5.0       Findings, conclusion and recommendation

5.1       Summary of findings

5.2       Conclusion

5.3       Recommendation

5.4       Bibliography


Designed interview Questionnaire



During 1892, to 1952 of the free-Banking Era, there are no laws, rules or regulation guiding the operational activities of the commercial banks.  That single era produced many banks, which did not meet up the specifications and dictates of modern banking.  And from 1957 to 2005, remainable changes have been provoked and witnessed in the Nigeria financial environment.  It is in 1952 that the first Banking ordinance was introduces, vesting the control of banking in the financial secreting the colonialist.  Consequently the Central Bank of Nigeria was established on March 17th 1958 by the central bank ordinance of that year.

The Central Bank of Nigeria in its endeavors to create enabling banking environment seeks outlet upon indirect control mechanism such as reserve requirement stabilization of securities, open market operations (0m0), and interest rate policy, periodic moral suasion and other prudent ratios, such as capital fund adequacy and legal landing limit to improvise.

The recent development in the Nigeria Commercial Banking system has added force to the CBN efforts to enhance the quality of banking operations.  The “merge and Acquisition” system of 2004 propose by the CBN advances and samples the general problems inherent and also takes a giant student towards solving or reducing the anomaly to manageable proportion.

The mechanism traced the program (SAP) of 1986.  It is also worthy of note that the commercial banking sector has expensed a tremendous growth pattern, since the advent of SAP, in 1986 both in terms of the number of new entrants into the industry and the volume of business transactions.  The total of commercial banks and their branches offices increased from 29 to 1,367 as at December 31st, 1986.  It is said to note that the geometric growth trend is lingering menace to the banking industry.

1.1       STATEMENT OF PROBLEM              

Banking laws and regulations are meant to guide the operations of banks in Nigeria.  In spite of the operation of their laws banks especially commercial banks are not finding their laws feet in the economy as evidenced by recent banks failures.


a.         To protect the helpless depositors

b.         To ascertain, if banks regulations has any effect in the performance of commercial banks

c.         To sanitize the banking environment

d.         Help in the equation of comical banking that can facilitate mobilize and channel savings for economic growth.

e.         To put inflation to check.

f.          Creates sustainable friendly banking environment in Nigeria

g.         Prohibition of a licensed financial institution in Nigeria

h.         Control and management of distress and failing banks

i.          Restriction of certain banking activities

j.          Imposing or prescribing penalty on any defaulting financial institution


This research work will undoubtedly be of immense benefit towards enhancing the activities (economically, financial and social responsibilities) of commercial banks in Nigeria with respect to banking regulation and reserves.

Moreover, government and its agencies will benefit immensely from this study in that it will help them put in place relevant policies that can cushion the effect of the problem identified in this study.

The student of business management, financial studies community, customers of the banks and economists will also benefit in no small way from this research work.

Finally this research work will also serve as a resource material to other researchers in the same field.Commercial Bank


The results of the present study are expected to validate or invalidate one or the other of the following hypothesis.

Ho:      Banking regulation and reverse requirements have not adversely affected the performance of commercial banks.

Hi:       Banking regulation and reserve requirement have adversely affected the performance of commercial banks.Commercial Bank


This study is basically intended to cover the effect of regulations and reserves on the commercial bank in Nigeria.  Due to the delicate and broad native of this research work, the scope of this study cuts across National boundaries and Nigerian Financial environment.Commercial Bank


Redtapism:-   Excessive use of formalities in public business, too much attention to rules and regulations

Seignior aye”-            The profit the government makes on the minting of coins since the intrinsic value (of the metal used) is always less than the face value of the coins

Bank reserves:-          This is the amount of money banks must keep available to meet the demands of depositors

Monetary policy:-      It means the various ways by which the federal government and the central bank seek to influence the supply of money and credit interest rates in order to achieve stated or desired economic goals.

Commercial Bank:-   This means any person who transacts banking business in Nigeria and whose business includes the acceptance of deposits withdrawal by charge.Commercial Bank

Open market operation:-      These are the sale or purchase of government securities in the open market.

Discount Rate:-          Is the price paid by the owner of securities to the central bank for converting the securities into cash.

Cash Ratio:-   The ration of the cash reserve being kept by banks to their total deposit

Cash:- Liquid or money resources of a company made up of pretty cash on hand as well as cash at bank.

Central Bank:-          The apex of the banking system.Commercial Bank

Bank Rate:-   This refers to the rate of interest at which the central bank lends to the banking system.Commercial Bank

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