The Effect Of Capital Adequacy On The Performances Of Banks In The Face Of Global Financial Crises (Case Study Of Selected Bank)

Project and Seminar Topics with material for Banking and Finance

Project and Seminar Topics with material for Banking and Finance


This research work focused on the effect of capital adequacy on the performances of banks in the face of global financial crises using selected banks as a case study. The study aimed at enumerating the factors that affect adequacy of work bank capital and possible solution to them. Data used for this research work were obtained through primary and secondary methods of collections. Simple sizes of 30 were used for these researches which are drawn on the staff of the selected banks.

The data used were presented in a tubular form, analysis done using percentages, chi-square used in testing the hypothesis and data were interpreted based on decision rule. Based on the findings, it was revealed that capital adequacy has a positive effect on the performances of banks in the face of global financial crises. Conclusion and recommendations were made.

Table Of Contents

Preliminary Page(s)

  • Title page
  • Approval page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of contents

Chapter One

1.0 Introduction

  • 1.1 General overview of the study
  • 1.2 Statement of the problem
  • 1.3 Objectives of the study
  • 1.4 Research questions
  • 1.5 Significance of the study
  • 1.6 Scope of study
  • 1.7 Limitations of the study
  • 1.8 Definition of terms

Chapter Two

2.0 Literature Review

  • 2.1 Background of Bank capital Adequacy
  • 2.2 Components of Bank capital
  • 2.3 Functions of Bank capital
  • 2.4 Factors/variables influencing capital Adequacy of Banks in the face of global financial crises and their effects
  • 2.5 Yardstick for measuring Bank capital Adequacy in the face of global financial crises.
  • 2.6 Capital Adequacy of selected banks.
  • 2.7 The effects of capital Adequacy in the performance of Banks in the face of global financial crises.

Chapter Three

3.0 Research Methodology

  • 3.1 Introduction
  • 3.2 Sources of data collection
  • 3.3 Method of data collection
  • 3.4 Sample sizes/analysis
  • 3.5 Method used and why
  • 3.6 Techniques for data analysis
  • 3.7 Questionnaire

Chapter Four

4.0 Data Presentation and Analysis

  • 4.1 Data presentation
  • 4.2 Data Analysis
  • 4.3 Findings

Chapter Five

5.0 Summary, Conclusion and Recommendations

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendations
  • Bibliography
  • Appendix.

Chapter One

1.0 Introduction

1.1 General Overview Of The Study

Bank occupies an important position in every economy and as such its contributions to the growth and development of any economy need not to be over emphasized. To this extent, the soundness and safety of financial institutions has become a thing of great concern to the government, the regulatory authorities, the investors, the creditors and the entire public.

In the past we experienced series of Banks failure of many reasons were accounted for capital inadequacy.
According to Osubor (2003) Bank capital consist of paid up capital, statutory reserves, share premium reserve and other undisclosed reserves. It is worthy to note that the strength of any Bank is determined by the nature and capital resources available to a bank. Capital adequacy is one of the major factors to be considered when the soundness, safety and performance of a particular bank is being assessed. For a bank to continue in operation and compete favorably in the banking industry. It must have an adequate capital. Capital adequacy according to BOFIA (Bank and other financial institution act (1991) is defined as quantum of find which a bank should have a plan to maintain in other to conduct it’s business in a prudent manner. It can equally be defined as the amount of capital that can effectively discharged the primary capital functions of preventing banks failure by absorbing losses which could not be absorbed by the normal earnings. Capital adequacy enable bank to attract funds and to offer varieties banking services to customers.

It is worthy to note that there are yardsticks for measuring banks capital adequacy even in the face of global financial crises and to achieve this, banks fund have usually been measured as ratio of certain key balance sheet items such as total deposits, total assets or total risk assets. Various level of these rations are then used to indicate the adequacy of a bank.

Lastly, what constitutes capital adequacy of bank today might not be adequate tomorrow because of the dynamic nature of our economy.

1.2 Statement Of Problems

The problems associated with capital inadequacy of banks in the face of global financial crises have caused a lot of harms and impediments to the economic growth and development in the country.

Capital inadequacy of banks have been identified as major reason for bank failure in Nigeria and also seen as a factor militating against industrial development in Nigeria since banks are unable to finance agriculture and other major sectors of the economy.

Capital inadequacy of banks cause actual shortage of investment funds in the economy as it limits the lonable fund. Which bank can grant to a particular borrower or to a group of related borrowers.

Capital inadequacy has made it so difficult for many banks to settle their financial obligation as when due and unable to attract fund from the customers as the customers or depositor must have lost confidence on the banks.
Capital inadequacy has equally limited commercial banks in Nigeria from acquiring or adopting the new modern techniques in banking to keep pace with the trend of globalization and as well hindered them from carryout banking across the border.

It is therefore, in the light of my concern over the safety and soundness of our financial system, the economy and the entire banking public that this research topic is being selected.

1.3 Objectives Of The Study

  1. This study seek to investigate on the role bank adequate capital plays in the industrial growth and economy development in Nigeria in the face of global financial crises.
  2. To determine the effect of capital adequacy on bank performance and on the depositors.
  3. To determine the level of safety and soundness of a bank through base.
  4. To enumerate factors that are affecting of bank capital and possible solutions to them.
  5. To appraise and evaluate the development and growth, of bank using capital adequacy as a yardstick.

1.4 Research Question

The following Research Question will be used in this Research Work;

  1. Adequate capital is operationally imperative in banking?
  2. Does adequate capital of a bank determine it’s performance and ability to meet it’s financial obligation as at when due.
  3. Adequate capital leads to confidence over mobilization of deposits?
  4. Adequate capital increases the bank ability to complete effectively in the market palace?
  5. Adequate capital does not determine the amount of loan given to a borrower or group of related borrower in the face of global financial crises?
  6. Adequate capital determines the level of confidence customers have on bank in face of global financial crises?
  7. Adequate capital increases the investment portfolio of bank as to enable bank to diversify it’s investment to ensure maximum returns?

1.5 Significance Of The Study

This research work will widen my knowledge as a student banker and enable me and the reader of this work to understand the fundamental roles which adequate capital can play in the banking industry and in the economy as a who my fellow student banker are equally going to benefits from this research work as it will advance their knowledge and equipped them with right information and skills which are obtained in the modern day banking creditors, investors and the entire bank customers will also benefits immensely from this research work as they will be provided with right and desirable information techniques and tools of measuring the position of their various banks.

The selected banks for study will also benefits from my recommendations. Writing of this project will equally be beneficial to me as it is a partial fulfillment of the award National Diploma (ND)

1.6 Scope Of The Study

This research work is going to cover some area including the importance of adequate capital in the performance of bank, the measures and tools of appraising capital adequacy of banks, the factors affecting bank capital adequacy in the face of global financial crisis and the suggested ways of solving these problems as to ensure soundness, safety and effective management of bank’s capital. For clarify and better understanding, some banks are selected as a case study.

They include: Fidelity bank and intercontinental Bank PLC

1.7 Limitations Of The Study

In the process of gathering information for this research work, there was a problem of:

Sourcing of information:

Typically this is uncompromising attitude of some bank official in charge of possible and relevant information.

Problem of time constraint:

The time allocated to this work is relatively small for the researcher to visit place and send questionnaire to various respondents.

Problem of finance:

This constitutes a serious problem to the research study. Excessive transportation in the course of data collection and cost of photocopying materials constitute problem to this research study, lastly, other academic works could not allow the time allocated to this research work be sufficient.

1.8 Definition Of Terms


This means shareholders fund. i.e those funds attributed to the proprietors published in the balance sheet.


A bank is a corporation or body person who accepts money on current and savings accounts pays such money on demands and carries out some other financial function for their customers.


This refers to the capital employed in the bank. It is the reward for risk excess income over and above the expenses incurred in earning income.


This refers to the ability of a bank to raise certain amount of fund at a certain cost within a certain period of time as to be able to settle it’s financial obligation as they fall due.

Bank Capital Adequacy:

This as used in this research work refers to the amount of capital a bank should maintain in order ton conduct it’s operations in a prudent manner.


This refers to the ability of bank capital to absorb possible losses and make bank continue in operations.


This means banks and other financial institutions act. This is an act that guides the activities of all licensed banks in Nigeria.


These means what covers or affect the whole world.

Financial Crises:

This means a time when financial difficulties is at it’s worst point.

Capital Base:

This is a situation where money available in a business is sufficient for organization to carryout it’s activities.


This is a person or an organization that invest money in something.


This means a person who puts money in a bank account.


This is a country, where you are thinking about it’s economy system.

Banking Industry:

This comprises all the financial institution in a country that carries out financial functions.

Capital Inadequacy:

This is a situation where the money available in business is not sufficient for the organization to carry out is duties.

Primary Capital:

This represents the highest quality form of capital for bank. It consists of common stock, retain earnings, general and legal reserve.


This refers to those who contribute financial resources to a bank.

Bank Regulation:

This can be unexcused as a process by which the central bank of Nigeria (CBN) supervises or issues out guideline to the commercial banks for the smooth running of their activities.

Equity Capital:

This consists of ordinary paid up capital, share premium, under distributed profits, statutory and general reserve.

Regulatory Authorities:

These are bodies that regulate and control the activities of financial institutions. They include CBN, NDIC, and CIBN

Chapter Five

5.0 Summary, Conclusion And Recommendations

5.1 Summary

The liberalization of banking industry couple with the existence of universal banking and the on going globalization have necessitated for adequacy of bank capital and good asset management which will be used to acquire needed infrastructures and equipment as well as carrying out banking in a prudent manner. Against this background chapter one was aimed at introducing the research topic by having the general overview of the research topic, objective of the study, it’s scope and limitations were equally discussed. Chapter two is the literature reviews. Here, the various relevant review expressed by experts on the research topic were discussed. In this chapter, we showed how capital is being classified from different points of review by marry authors. Adequate capital we said is imperative in banking based on the promise that of attracts additional fund and increases lonable fund and then leads to profit maximized. Data were collected by means of oral interview and questionnaire distributed to the banks and it’s customer which afforded a forum for detailed discussion on the research topic. Pre-determined scoring schemes were adopted as to enable the responses to be transformed into quantifiable units. The results obtained were then subject to statistical testing. This chi-square significance was used to test the difference among sample proportion.

5.2 Conclusion

At this point we are able to establish the fact that stability and growth of any economy is contributed by the fundamental role of bank which is intermediation between the surplus and deficit units of the economy and the banks ability to carryout this fundamental role is synonymous with its capital adequacy act as a cushion against unforeseen losses which may occur in normal banking operation even in the face of global financial crises. Adequate capital as we discovered in this research work provides bank with opportunities to make acquisition in related areas as to bring into the group additional services so as to meet the ever dynamic needs of customers at this point, one should be able to appreciate the term adequate capital, its role and why it constitutes the fundamental part of bank management. It is worth note that when a bank is adequacy capitalized it becomes the ideals and only option bank to bank with in the eyes of depositors. To the regulators, it becomes a model and ideal corporate body. To the shareholders and creditor, it remains the only reliable source of earning and preferred institution to invest in and to the society, it remain the ever caring and strongly conclude that capital adequacy contributes a lot towards the performance in the face of global financial crises and it’s role is operationally imperative in banking.

5.3 Recommendations

It is an established fact that adequate capital is a “sinequanon”. Therefore, for a bank to operate effectively and profitably, the following measure should be adopted:

  1. Bank should denote more time in ensuring an effective management of their capital.
  2. Government through C.B.N should establish definite and standard tools for evaluating and measuring the level of capital adequacy of banks
  3. The regulatory authorities should also wake up to their responsibilities by ensuring that banks maintain the required level of capital adequacy.
  4. The management of every bank should formulate and initial measures that will enable them to manage and maintain an acceptable level of capital adequacy.
  5. Nigerian should indicate banking habit by investing in bank shares to help increase the bank capital base.

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