Modelling Risk Management in Banks: Examining Why Banks Fail.

摘要

The persistent bank failures in the Nigerian financial system have been a major concern of the government, depositors, shareholders, and the general public because of the important roles banks play in the economy. The aim of this research was to determine why there have been persistent bank failures in Nigeria and to investigate whether ineffective risk management in banks, coupled with poor corporate governance practices and nonadherence to regulations (independent variables), play a significant role in the banks' performance(dependent variable). The variables were operationalized by taking VaR as the proxy for risk management, having CRO as proxy for ERM , CAR as proxy for corporate governance, and ROE as proxy for performance. The square gap model formed the theoretical basis of this study. The research design was survey design, and a survey instrument was used to collect data from the target population of 300 senior bank executives who were randomly selected from the 24 operating banks in Nigeria. A multiple regression model was used to examine if risk management, governance practices, and regulation adherence significantly predicted bank performance. The findings of the study confirmed that there is a significant positive relationship between the independent variables and the dependent variable. These findings suggest that, by adopting effective risk management, improving corporate governance practices, and adhering to regulations, Nigerian banks can improve their performance. This research has positive social implications for those in the banking industry by ensuring the safety of the depositors' funds in banks, and stabilizing the payment system in the economy, which historically would have been disrupted by systemic failure in the banking industry.