THE LEGAL perspective TO CAPITAL RECONSTRUCTION OF BANKS IN NIGERIA
It is widely acknowledged that banks are an important element of an economic system and
that a bank's capital is the basis upon which it rests. This institution has persisted.
Observe rapid developments that often threaten to shake the foundations of our society.
banking system. At each stage of the crisis, depositors have always resorted to the government for assistance.
the Nigerian Central Bank (CBN) for assistance. Sadly, the two are not synchronized.
A resolution plan that would penalize individuals accountable for the plight of depositors and other creditors.
while saving the state or taxpayer money on the expense of resolving the situation.
Therefore, it has become vital to investigate the legal perspective on rehabilitation of this fundamental
Aspect of our banks and financial system, focusing on the difficulties encountered by institutions.
responsible for the restoration of bank capital during and after a crisis
The key actor in resolving the financial issue, the CBN, has just two primary instruments at its disposal.
Crisis management, namely liquidation and lender-of-last-resort powers. The
The use of the power of liquidation has a direct detrimental effect on the faith of depositors.
notably in situations when depositors have lost money to a bankrupt or defunct bank.
The power of lender of last resort ensures that no depositors lose money due to a bank's failure or bankruptcy.
The failing bank leaves many legal and ethical questions unanswered. The first concern is the expense.
The cost of repaying the depositor fund is borne by tax payers rather than the bank.
management that is often responsible for mishandling of the bank's capital, which leads to the bank's failure
Second, the criminal justice system often fails to penalize fraud offenders.
Mismanagement that results in either liquidation or expenditure of taxpayer funds. The outcome is that
Instead of enhancing the corporate governance culture of the system's banks, the lender opted not to do so.
of last resort tends to increase financial sector negligence, fraud, and mismanagement.
This necessitates an expansion of the regulatory institutions' functions in the system.
from just intervening to actively shaping and executing long-term capital
Rebuilding efforts in the banks. The investigation was conducted with the premise that banking
As long as crises continue to occur, there will be a need for resolution strategies.
Rebuild the bank's capital and provide liquidity, or the system will collapse in a panic.
may result in the collapse of the whole financial system.
Therefore, it is vital to unify the relevant legal processes and institutions
for the rebuilding of the nation's capital
1.0 BACKGROUND TO THE PROBLEM
Capital seems to have signified the head of cattle in Medieval Latin.
or other cattle, which have long been significant wealth generators
in addition to the fundamental meat, milk, skins, wool, and fuel they provide1.
Modern capital cattle may provide excess value for
accumulation. This wealth accumulation and preservation concept
across the ages This likely explains why Adam Smith claimed this.
“for accumulated assets to become active capital and be used to further investment”
After its manufacturing, it must be fixed and realized in a certain topic.
labour is past”
The asset may be leased (for one-time production) or purchased.
Acquired outright for series production collaboration. This makeup
permit capital to demand two prices, either the service price (rent) and perhaps the capital price.
The Mystery of Capital, Finance and Development, March 2001, Vol. 38, No. 1, p. 29; also accessible at http://www.imf.org/external/pubs/ft/frand/2001/03/Desoto.htm. visited on March 4, 2010
Economics of Development: An Empirical Investigation by J. Yotopoulos and N. B. Jeffrey New York: Harper Row Publishers, pp164-165
Today's capital consists of all assets that may be saved for future use.
the manufacturing of products and services. Even manual labor has been performed.
Humans are classed as a kind of capital, thus the phrase “human capital.”
to distinguish human-taught talent and enterprise from primitive
labour. Capital in a classical notion ” is conceived when economic
The potential of an asset is documented in titles as security, a mortgage, and a deed of trust.
contract and other data of a similar kind, when the most economically and
socially beneficial characteristics of the item as opposed to the just more
Consideration is given to striking facets of the asset
The dynamic character of capital
Highlights its significance and explains why it will continue to captivate the audience.
Attorneys and economists' intellects
It is evident that in every market system, the vast majority of wealth is concentrated at the top
concentration in capital in the form of share and security holdings
Futures trading and bank and other financial institution deposits.
Banks are also recognized as the pivot upon which the capitalist system pivots.
revolves. Therefore, it is essential for the effective functioning of the market.
framework that should safeguard the capital of banks and the banking sector
4 Hernado, D. S. op.cit
and frequently modified to preserve banking safety and soundness
Due to this characteristic of capital, capital accumulation will continue.
to be the key concern for economic and legal progress. in no other method
Is there a greater example of the multiplicative power of capital than the banking industry?
system. Banks are a crucial conduit through which credit is issued.
accessible to the real sector for production of products and services
services. Governments also employ banks to transfer and promote economic activity.
Their monetary policies foster economic development. Government has achieved
The federal Reserve made use of monetary, regulatory, and supervisory strategies to
improve the financial system
1.1. JUSTIFICATION FOR THE RESEARCH
There are several challenges in business and banking sector reorganization,
recurrence of Nigerian bank crisis indicates an underlying conflict
Banking enterprise as stockholders strive for greater profits on
their investment at the detriment of depositors and other
banking system. Consequently, all banks, regardless of how effectively their risks are handled, are subject to the same regulations.
share the same underlying fault in their financial statements. Their obligations include
Certain and short-term, although the worth of their assets is unknown.
enduring in nature This uniformity of banks resulted in a strong propensity for
The quick spread of acknowledged issues in one bank to other banks and the
whole financial system if the issues are not addressed.
Failure to achieve a balance between stakeholders' economic drive and other factors
Due to the banking system and safety of depositors' funds,
a number of Nigerian banks have failed. Our legal and regulatory system
They looked unprepared to face these obstacles.
THE LEGAL PERSPECTIVE TO CAPITAL RECONSTRUCTION OF BANKS IN NIGERIA