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Abstract Of An Overview of the Risks Associated With Bank Lending in the Banking
An overview of risk associated with bank loading in the banking sector is a topic Chosen from the financial field.
The purpose of this research work is to identify the factors and effect of risk in the financial institutions with special reference to banks.
This research work will expose us to:
1. Find out the extent to which risk of lending constituted major problems.
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2. find out the extent to which risk is associated with lending in the banking sector.
3. Find out the need for effective & efficient of risk in the growth of banks.
4. Find out the need for effective & efficient analysis of risk inherent in bank lending.
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
Banking can be aptly described as a high-risk business. For this reason a lot of attention is directed at risk management in banking. The need of such emphasis on risk management becomes even more urgent as banks go apple with large volumes of non-performing assets. This thinking is shared by Rose (1987:54), who points out that while the 1950s focused on techniques for the management of banks assets and the 1960s and 1970s emphasized liability management banking in the eighties was concerned with risk-how to measure risk and how to control risk for the betterment of banks and its customers. This view of risk remains true and on issue for bank management in the lending functions.
It is obvious that the subject matter of “risk” assume considerable importance in determing business success and failures, especially in banking of course, the conventional approach to appreciating that fact in financial management is often linked to inverse between the plausible business outcomes, a high risk heads to more profit value and vice versa.
In banking strictly speaking, we can extend this argument to imply that the more a bank achieves and retains liquidity (less risk) the less it gains in profitability (less returns).
Unfortunately, Uncertainty-another variable also affects business outcomes is not easily understood as in the case of ‘risk” yet we must reckon with the decisive dicey and irrational subjective chances, what do we exactly mean by the term “risk” and “uncertainty”? The answer to these questions forms the basis for the discussion of the overview, which comprise of impact and implications of the term for bank management.
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