The Legal Perspective to Capital Reconstruction of Banks in Nigeria

ABSTRACT

It is generally accepted that banks are an inevitable component of an economic system and that a bank’s capital is the foundation on which it stands. This foundation has continued to witness dynamic changes leading to crises that often threaten to rock the foundation of our banking system. At each of the points of the crisis, the depositors had always turned to the state and the Central Bank of Nigeria (CBN) for help. Unfortunately, the two have no coordinated resolution scheme that would punish those responsible for depositors’ and other creditors’ woes and, at the same time, save money for the state or taxpayer from the cost of resolution of the crisis. It has therefore become necessary to examine the legal perceptive to the rehabilitation of this basic aspect of our banks and the banking system, particularly the challenges faced by the institutions responsible for bank capital reconstruction during and after the crisis.

The major player in the resolution of the banking crisis. The CBN has two major crisis management tools: the power of liquidation and the power of lender of last resort. The exercise of the power of liquidation has a direct negative impact on the depositors’ confidence, especially where depositors have lost money to a failing or failed bank.

The power of lender of last resort guarantees that no depositors lose money to a failing or failed bank but leaves many legal and moral issues unresolved. The first issue is that the cost of repaying the depositor fund is borne by the taxpayers’ money instead of the bank management, that are often responsible for the mismanagement of the bank’s capital that lead to the crisis.

Secondly, the criminal legal system often does not punish the perpetrators of fraud and mismanagement, leading to either liquidation or spending of taxpayers’ money. The result is that instead of strengthening the corporate governance culture in the banks in the system, the lender of last resort tends to encourage carelessness, fraud and mismanagement in the banking system.

This, therefore, calls for an extension of the roles of the regulatory institutions in the system from mere intervention to active participation in fashioning and implementing lasting capital reconstruction measures in the banks. The research proceeded on the assumption that the banking crisis will continue to happen and there will continue to be needed for a resolution scheme that will reconstruct the bank’s capital and beef up liquidity; else, panic will ensue in the system, which may lead to the total collapse of the banking system.

Therefore there is a need to harmonize the legal procedures and institutions necessary for capital reconstruction in the country.

References

Aboki, Y. Introduction to Legal Research Methodology, Tamzaza Publishing Co ltd, Zaria, 2009

Agilietta, M and Cobbaut R ‘Financialisation of the Economy , Macroeconomic Regulation and Corporate Governance’‘ Kluwer Law International, The Netherlands 2003

Akeju, J.A. Accounting for Company Business, 2nd ed. JBA Associates ltd, Lagos, 2004.

Armour J and Deakin S. Norms in Private Insolvency: ‘London Approach’ to the Resolution of Financial Distress. Kluwer Law International, The Hague 2003.

Black, H.C: Black Law Dictionary 6th ed., St Paul Minn.West Pub. co 1979. Campbell, D.C and Campbell, R. G, Introduction to Money and Banking Rinehart & Winston Inc, London.

Gasiookwu, M . U. Legal Research And Methodology Fab Educational Books Jos, 1994

Goldface –Irokalibe I.J. Law of Banking in Nigeria, Malthouse press limited Lagos, 2007

Gower, L.C.B. Modern Company Law, 4th ed. Stevens & sons, London, 1979.

Irukwu, J . O, Corporate Responsibility in a world of Risk and Uncertainties, Witherby & co Ltd, London.

Ituwe, C. E. Elements of Practical Banking, University Press limited Ibadan 1983.

The Legal Perspective to Capital Reconstruction of Banks in Nigeria

A Study of Customary...

ABSTRACT This study is aimed at studying the customary land...

Determining the Proper Law...

ABSTRACT Where a dispute arises from the breach of a...

The Criminal Liability of...

ABSTRACT This is an attempt to look at the corporation's...

A Critical Appraisal of...

A critical appraisal of uniform, personal income tax system...

An Assessment of the...

ABSTRACT In its 50-year history as an independent nation, Nigeria...

Search and Seizure in...

Search and seizure in Nigerian law with particular reference...

A Study of Customary Land Law and Tenure Practices of Six Communities of the Lower Benue River Valley of Nigeria

ABSTRACT This study is aimed at studying the customary land laws and tenurial practices of the communities of the Nigerian Lower Benue River valley. These...

Determining the Proper Law of Contract Under Private International Law

ABSTRACT Where a dispute arises from the breach of a term or terms of a contract between 'A' a Nigerian, and 'B' an Italian, the...

The Criminal Liability of Corporations

ABSTRACT This is an attempt to look at the corporation's liability for its own acts and those of Its organs or agents and servants. The...

A Critical Appraisal of Uniform Personal Income Tax System Within the Context of Nigerian Federalism

A critical appraisal of uniform, personal income tax system within the context of Nigerian federalism. Download this dissertation in PDF for Free.

An Assessment of the Legal and Institutional Framework for the Prevention and Mitigation of Ethno-Religious Conflicts in Nigeria

ABSTRACT In its 50-year history as an independent nation, Nigeria has experienced over two hundred recorded violent ethno-religious disturbances. The first major ethno-religious disturbance exploded...

Search and Seizure in Nigerian Law With Particular Reference to the Northern States

Search and seizure in Nigerian law with particular reference to the Northern States.

An Appraisal of the Role of ECOWAS Court of Justice in the Protection of Human Rights Under the ECOWAS Treaty

ABSTRACT This study examined the role of the ECOWAS Community Court of Justice (ECCJ) in the protection of human rights in the West African sub-region,...

The Imperatives of International Criminal Tribunals and International Criminal Court on Crime of Genocide

ABSTRACT The idea of a strong standing tribunal to try serious violations of international law has been around since the end of World War II....

An Analysis of the Concept of Negotiation and Arbitration as Methods of Alternative Dispute Resolution in International Law

ABSTRACT Disputes or disagreements are unarguably and necessarily an inevitable part of human existence, flowing directly from communication, inter-reaction and relationships. This can occur at...