In a developing country like Nigeria, bank regulation plays important and sensitive roles hence their performance directly affects the growth, efficiency and stability of the economy. Oke (2006) opined tat the relevance of banks in the economy of any nation cannot be overemphasized because they are the cornerstones, the linchpin of the economy of a country. As the major holder of the nation financial asset, the banking regulation presents the largest potential risks for financial and reputational losses in the event of co-operate failure and distress.
An efficient banking system is a sign of qua non for efficient functioning of nations economy. This for the industry to be efficient, it must be regulated and supervised in view of the failure of the market system to recognized social rationality and the tendency for market participants to take undue risks which cold impair the stability and solvency of their institutions according to the Thatcher 2002, Onyido, 2004, Coen, 2005, Lemo, 2005, Balogun 2007, Ekpeyoung and Data 2007.
The Nigerian banking sector reforms essentially entail the build-up of banking size and business scale of the banking institution at the end at which smaller number of, stronger institution will emerge by Ogunwole 2004, Ogunleye 2005, Soludo 2005, and Oluyemi 2006, Emeni and Okafor 2008.
1.1 BACKGROUND OF THE STUDY
The experience of many countries shows that regulation and supervision are essential for stable and healthy financial system and that the need becomes greater as the number and variety of financial institution increase. The banking sector ahs always received upper attention on protection due to the vital role in plays in an economy. The minimum banking regulation requirements are one of the three “pillars” of macro prudential regulation.
Bank capital serves both as a buffer and as a disseminative to excessive risk taking when general equilibrium effects are taken into account; however, it is not clear that higher capital requirements will reduce the level of risk in banking system (Gale 2010). It has becomes evident that one of the very completing requirement for the success of any business in any economy is the existence of favorable regulatory environment as evidenced from Schmid, 2002, Dada 20007, and Ekpenyoung. Submitted that regulations can either promote or stifle business performance. Empirical evident from Coen and Thatcher, King and Quaghi 2005 also suggested that environmental regulations deter entry into industries where the requirements for regulatory compliance activities are higher.
1.2 STATEMENT OF THE PROBLEM
The resolve of the central bank of Nigeria to place the banking system in regional and international context and promote soundness, stability enhanced efficiency of the system was the major reason behind the increased minimum base for all universal banks to N25billion effective from December 31, 2005. This invariably promoted a regulatory induced restructuring in the form of consolidation though merger and acquisitions. The policy initiative will definitely pose some problems and challenges to both the banking system and economy.
Regulation on doubt is needed to bring into the banking sectors as well as putting it in an internationally competitive status. Caved to these ensured with the problem of large and complete system created by the reforms such that the issue of whether they guided the anticipated results is debatable (Oke 2006; Balogun 2007 and Gale 2010). Although the regulation supervision of bank was expected to bring order to the choice situation that had developed in financial sector since the late 1980’s.
1.3 OBJECTIVES OF THE STUDY
The objectives of the study of this very topic, banking regulation and performance of the Nigeria banking industry are:
1.4 RESEARCH HYPOTHESIS
In this study research hypothesis displays a vital role in the investigation of the particular study
Ho: Banking regulation and its performance are essential for stable and healthy financially institution.
H1: Banking regulation and its performance are not essential for stable and healthy financial system.
Ho: Banking sector has always received upper attention of promotion due to the vital role it plays in an economy.
H2: Banking sector has always received lower attention on protection due to the vital role in plays in an economy.
Ho: Bank regulations serve both as a buffer and as a designation to excessive risk taking
H3: Bank regulation does not serve both as a buffer and as a designation to excessive risk taking.
Ho: It is not clear that higher capital requirement will reduce the level of risk in the baking system
H4: It is clear that higher capital requirement will reduce the level of risk in the banking system.
1.5 RESEARCH QUESTIONS
In the light of the above, the paper captures the impact of banking regulation on the banking industry performance and poses the following questions:
1.6 SIGNIFICANCE OF THE STUDY
The research will be useful in examining the effect and important of banking regulation as a vital information system. The directing not only business sector to such relevant warning out only banking sectors but all the industries from neglect of banking regulation and encouraging all to obey head the warning of banking regulation information.
The following classes of people will find the work as useful or the subject of escalating the development of the bank though the regulation of banks or any industry in the country.
1.7 SCOPE OF THE STUDY
It is important to note that no research work is purely original. Some information which is vital to the topic must to be drawn from work of others. With acknowledgement and appreciation, the researcher includes textbooks of al forms or branches of banks. Textbooks in management finance and marketing, magazines and encyclopedia were used extensively apart from extensive use of the literature; other methods of result were included: