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Critical Analysis Of The Relationship Between Credit Management And Bank Distress


Over the years, the deterioration of the quality of loans and advances in the banking sector has led to distress in the sector. The sector is at cross roads of a democratizing policy and a recovering economy. As in most resource management challenges, bank management and most especially the specialized field of risk management face significant incremental management opportunities. Due to the fact that banks are proliferating, professional manpower resources are stretching them.

Clearly, a clear headed definition of corporate risk priorities embossed upon an appropriate credit culture rather than the short term opportunistic allure for “poisonous Profit” is the way to go.

The government through its principal agent, the Central Bank of Nigeria controlled the quality of risk assets through the use of guidelines. The prudential guidelines which came into being in 1990 is one of such. Prior to this, credit quality classification and subsequent loan loss recognition were done haphazardly in banks. Even though prior to 1989 the CBN was solely responsible for bank general supervision, reports of loan loss classification were never for public consumption neither were banks given uniform guidelines to ensure safe and sound banking practice. This has however changed since 1989.The study seeks to take a critical analysis of the relationship between credit management and bank distress.

The study carried out a survey of 40respondents of the bank. Research findings revealed that there exists a casual relationship between credit management and bank distress (See table 4.1(b).Although it was established that portfolio deterioration is pervasive in the Nigerian financial system and the need for continuous loan supervision and periodic portfolio reviews the study revealed that there is efficient credit management in Zenith Bank which has led to low risk exposure and insignificant debt portfolio or overhang.


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