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CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY Banks plays crucial roles in the process of economic development by mobilizing funds from the surplus spending units into the economy, and by on. Lending such funds to the deficit spending units for investment, banks increase the process. The quantum of national savings and investments through an appropriate investments multiplier, the volume of goods and services produced in an economy increases overtimes as a result of the investment projects embarked upon through banks funds. Also through banks direct and indirect contributions towards the growth of the national economy, they (banks) succeed in promoting an efficient payment system, and in creating banking habits and in developing the society at large. I intend to look at the possible reasons for bank distress and the effects of such failures on the rest of us before looking at “The Role of Accountant in Managing and Liquidating a Distress banks”. A various times over the past five years of the structural adjustment programme (SAP) the banking industry had to cope with different types and forms of difficulties, all in a bid to record and sustain what one may call impressive performance we have for instance been at different times, the removal and late re-introduction of selling on interest rates. The seemingly nectarous and dreaded stabilization securities have also become one source of treasury management policy devotement that banks have learnt to live with. The term “distress” means great pains discomfort or serious sufferings caused by wants of money or mismanagement of money by bank officials which as we know is a complete relation of the trust reposed I them by innocent investors. The role of accountant in managing and liquidating a distress banks are too much and cannot be over emphasized when liquidating a distress banks. Accountants has to see that all the assets and liabilities of distress banks are being valued by expert values. The accountant has to be fully involved in appointing an expert liquidator who would then sell the assets and liabilities of the distressed bank by means of auction to the general public. In this case, it is not only that the property of the bank is being liquidated but also, the property of the debtors of the distressed bank. The liquidator has to fall back on the assets which the debtors of the bank used as their collateral when borrowing money from the bank. The money being recovered from the proceed should be used to settle the creditors of the distressed banks. This is so because the bank has been turned “DISTRESS” by the Central Bank of Nigeria (CBN) as a result of its inability to meet up with the stipulated guidelines of having of capital and non-marketable assets base. 1.2 STATEMENT OF PROBLEM There are many problems which could eventually lead to bank distress just as there are many possible causes of death of a human being. Some of the problems are stated here but they are in no way exhaustive. i. Bad management ii. Inadequate capital iii. Risk asset portfolio iv. Assets and liabilities management v. Boardroom crisis vi. Inability to adopt to changes vii. Fraud viii. Planning etc. 1.3 OBJECTIVE OF THE STUDY This research work studies the role of accountants in managing and liquidating distressed banks. More especially the objective of these study are: 1. To find out the extent to which the distress in the banking sector is attributable to the negligence, incompetence or other acts of omissions of the accountants. 2. To know the extent to which accountants report in the failed banks fulfill the intention or the letter of the law 3. To know if the law should be changed to make accountants a criminal for negligence performance of duty or the retention of current civil liability 4. To examine if failed banks decree should be amended to enable prosecution of accountants whose domestic reports to management differed from their statutory reports to shareholders of banks which eventually collapsed 1.4 RESEARCH QUESTION The following research questions were formulated to guide this study: 1. To what extent was the distress in the banking sector attributable to the negligence, incompetence or other acts of omissions of the accountants? 2. To what extent do you consider that accountants report in the failed banks fulfill the intention or the letter of the law? 3. Do you think the law should be changed to make accountants a criminal for negligence performance of duty which reduce most loss or would you prefer that the current civil liability be retained? 4. Should the failed banks decree be amended to enable prosecution of accountants whose domestic reports to management differed from their statutory reports to shareholders of banks which eventually collapsed? 1.5 SIGNIFICANCE OF THE STUDY: The significance of the study is that it will highlight the importance and consequences of not managing the distressed banks properly. Some of the benefits that may occur from this research work ae as follows: Banks will give them a way to face the problems that leads to liquidation on time, that is to say that it will reveal to them the causes of bank liquidation which they must guard against. The masses and accountants will equally benefit from this study because implementations of findings and recommendation in this study will automatically leads to improve standard of managing and closing the distressed banks. 1.6 DEFINITION OF TERMS: BANK; This is an organisation that provides various financial services, and accepting of valuables from their customers. LIQUIDATING: It is process of closing a business and selling everything it owns in order to settle their debtors. ACCOUNTANT: An accountant is that person who undergo a training in accounting system. DISTRESSED: It is a problem caused by not having enough money.
Keywords: THE ROLE OF ACCOUNTANT IN MANAGING AND LIQUIDATING DISTRESSED BANKS
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