BACKGROUND OF THE STUDY

In the content of the financial system, the term “Banking Regulation” appears relevant to the banking sub-system, it refer to as a body of specific rules or agree behavior either imposed by government or external agency or self imposed by some government or external agency or self imposed by the explicit or implied agreement within the industry that constrains the activities and business operations on the instructions or the industry to achieve a defined objectives and act fluently.

It delimits the scope of financial regulation, which encompasses regulation of financial markets. Consequently the subject of this discussion is especially restricted to regulations affecting banks, the resent introduction of universal banking frame work not withstanding indeed since the introduction, except for the guideline an universal banking, universal regulations have not witnessed service charges. The regulation of the banking industry in Nigeria dates back to 1952, when the first banking law was promulgated as an attempt to sanitize the industry, which before then had been without any mercifully form of regulation, a factor that was responsible for the mass collapse of many indigenous banks which sprang up between 1929 and 1951. Since 1952 a good number of regulations have been introduced as a way of enhancing the sanity of the system.

Prior to the establishment of Central Bank of Nigeria by the CBN act of 1958, there existed a body institution known as the British Colonial government, was intended to serve as central bank for the Anglophone west Africa. Thus, the board was charged with the West African pound which serves as the legal tender currency in Ghana, Nigeria, Sierra Lone and the Gambia. The board nevertheless suffered a number of weakness for which it was criticized. The weaknesses are as follows:

1.       The board was involved in physical distribution of currency from one point to the other.

2.       Its activities were considered discriminatory against indigenous West African industrialists.

3.       The board lacked the necessary apparatus with which to control money.     

These weaknesses led to the widespread agitation for the establishment of an indigenous central bank in Nigeria.  

Three major commissions were set up by the British Colonial Government the 1950’s to look into the possibilities of establishing a central bank in Nigeria.

The commissions were:

i.        J.L fisher’s commission (1952)

ii.       I.B.D. commission (1953) and

iii.      J.B Loyne’s  commission (1957).

The first two commission (J.L fisher and I.B.R.D), concluded that Nigeria was not wiped enough for the establishment of a central bank. It was his view that led to the reregulation of the C.B.N Act of 1958.

Empowering the Central Bank of Nigeria in the discharge of its duties as the apex regulatory institution, ensuring the efficiency and effectiveness of the universal banking operating in the country. Apart from banking laws, the government through the C.B.N uses several other means which also assisted in regulating the activities of universal banks operating in the country. The C.B.N uses several other means in regulating the activities of other financial institution like insurance companies, finance houses and the Nigeria stock exchange e.t.c. the principal regulatory bodies are Central Bank of Nigeria (CBN), Nigeria Deposit Insurance Commission (N.D.I.C) and National Insurance Supervisory Board (N.I.S.B), but we are going to limit our study on the C.B.N and N.D.I.C.

National Deposit Insurance Commission (NDIC) is an agent of the Federal Government established by decree No.22 of 15th June       1988 and commends operation in March 1989. Its main purpose is to insure the deposit liabilities of licensed banks and other deposit taking institution in Nigeria. The reasons for banking regulation, banks regulated for the following reason:

1.       To build up trust and confidence in the banking system.

2.       To ensure orderly growth of the country (Nigeria).

3.       To reduce risks taken by banks.

4.       To ensure solvency and livability by banks in the economic growth and development of the nation.

5.       To prevent a re-occurrence of mass bank failure to the pre 1952, free for all banking era.

6.       To achieve a variety of other ends.