INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The need for the adequacy and strength of bank asset is essential for maintaining bank liquidity and investment in profitable ventures which will result in profit and growth for the bank. Bank assets are the outstanding loans of customers, the banks own investments and the banks properties. Such as fixtures and equipment. When the customer defaults in the payment of loans, the collateral of the investment that was financed is sold for the recovery of the loan while the bank also takes over the investment that was financed. This type of asset is on the books of the bank. The banks liabilities are the investment and savings deposits, and Customer checking account. The intangible and tangible properties which are controlled and owned to produce economic value is referred to as asset. The Assets can be converted into cash and also include physical cash. The inspection of the Asset to determine the level and size of credit risk associate with its operation is referred to as asset quality.
It fundamentally focuses on the quality of the revenue yielding capacity of the loan which provides earnings for the bank. Consequently, Asset quality and loan quality basically means the same thing. According to (Basle, 1997) seven of the fundamental principle of banking supervision lies on asset quality or credit management. The prudential guidelines stipulate the guidelines for asset classification and disclosure, provision for interest accruals and off balance sheet engagement. The essence is to identify problems early and proffer corrective measures before it gets out of hand Ajie, H.A (1997). The study seeks to determine the effect of prudential guidelines on the asset quality of commercial banks in Nigeria. A case study of listed banks in the Nigeria stock exchange.
1.2 STATEMENT OF THE PROBLEM
The high level of risk involved in financial transactions possess great danger to the loss of cash, investment and profit if no check is provided interms of regulations and monitoring measures. The prudential guidelines stipulate the guidelines for asset classification and disclosure, provision for interest accruals and off balance sheet engagement. The essence is to identify problems early and proffer corrective measures before it gets out of hand. The apparent mismanagement of funds in the banking sector which led to the liquidation of many banks constituted a challenge to customer confidence as to the ability of banks to keep under safe custody the funds of customers. This as a result led to the formulation of the prudential guidelines. The problem confronting the study is to investigate the effect of prudential guidelines on the asset quality of commercial banks in Nigeria. A case study of listed banks in the Nigeria stock exchange.
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1.3 OBJECTIVES OF THE STUDY The Main Objective of the study is to investigate the effect of prudential guidelines on the asset quality of commercial banks in Nigeria. A case study of listed banks in the Nigeria stock exchange; The specific objectives include: i. To determine the nature of prudential guidelines. ii. To determine the level of asset quality of commercial banks. iii. To determine the effect of prudential guidelines on the asset quality of commercial banks in Nigeria. A case study of listed banks in the Nigeria stock exchange. 1.4 RESEARCH QUESTIONS i. What is the nature of prudential guidelines? ii. What is the level of asset quality of commercial banks? iii. What is the effect of prudential guidelines on the asset quality of commercial banks in Nigeria? 1.5 STATEMENT OF THE HYPOTHESES The statement of the hypotheses for the study is stated in Null as follows: Ho1: The level of asset quality of firstBank is low. Ho2: The level of asset quality of UBA is low. Ho3: The effect of prudential guidelines on the asset quality of First Bank is low. 1.6 SIGNIFICANCE OF THE STUDY The study seeks to engender the adherence to prudential guidelines on the asset quality of commercial Banks. 1.7 SCOPE OF THE STUDY The study focuses on the appraisal of the effect of prudential guidelines on the asset quality of commercial banks in Nigeria. A case study of listed banks in the Nigeria stock exchange. 1.8 LIMITATION OF THE STUDY The study was confronted with logistics and geographical factors. 1.9 DEFINITION OF TERMS BANK DEFINED A financial institution which was is established for the purpose of accepting deposits and other precious commodities from the public for safe keeping. PORTFOLIO DEFIINED This is a collection of investible funds. PRUDENTIAL GUIDELINES: The prudential guidelines stipulate the guidelines for asset classification and disclosure, provision for interest accruals and off balance sheet engagement. The essence is to identify problems early and proffer corrective measures before it gets out of hand. BAD DEBTS: There are debts which is not recoverable within the time frame set for their normal recovery period. DOUBTFUL DEBT: There are doubtful in case of recovery, hence they are termed doubtful debt. EFFICIENT PORTFOLIO: A group of asset that yield a maximum return for a given level of risk. RISKS: An index of the variability of realized from expected returns.
REFERENCES
Adekanhe, F. (1983); A Practical Guide to Bank Borrowing, U.K: Grahan Burn, Bedfordshire, U.K. Adeniyi, O.A (1988); Employment Credit Scoring as an Aid to personal lending Decision in Nigeria Commercial Banks: The University Banker,Vol.11 Ajie, H.A (1997); Credit Administration and Control in a Deregulated Economy, Port Harcourt: Osia International Press Ltd.
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