Commercial Banks – Controlling Of Customer’s Account (A Case Study Of Citizens International Bank Ltd.)
Commercial Banks – Controlling Of Customer’s Account (A Case Study Of Citizens International Bank Ltd.)
“Habit” is a settled disposition or tendency to act in a certain way, especially one acquired by frequent repetition of the same act until it becomes almost or quite involuntary, a settled practice or established and regular standard of behaviour. To place an order for the Complete Project Material, pay N5,000 to Then text the name of the Project topic, email address and your names to 08060565721.
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Banking habit as used in this study, refers to the settled practice or acquired tendency of patronizing the Banks by frequently utilizing the various services offered by banks and a widespread banking awareness.
Controlling of customer’s account as known today evolved from a rather humble beginning when the goldsmith discovered that only a small proportion of the money kept with him for safe custody was infact required by the depositors at any one time.
He therefore developed a system of controlling the amount left with him and the amount led to other people. The banking system which later inherited this found out that controlling is a major aspect of the management of customer’s account.
In view of the above, the Commercial Bank’s Customers account and later seeking ways to see if the standards are being operated as prescribed is known as controlling aspects for customers account.
Indeed, commercial banks have been and are likely to remain the document financial intermediaries in Nigeria for they at present account for over 51% of the resources of the financial system of the economy. They therefore occupy a strategic position in the economy and are more than most other units or sub-sectors able in all respects to influence the course of development.
No wonder, notwithstanding the deregulation of the economy, banking is still one of the most controlled or regulated industry in Nigeria.
In the amendment to the monetary policy circular No. 21 of January, 1987, the Central Bank of Nigeria (CBN) stated that “in order to further enhance and achieve a more efficient resources allocation, the following changes were made ….. all controls on interest rates were removed in line with the emphasis on deregulation of the economy. This goes further to show the importance of commercial banks in the economic growth of the country, because inspite of the deregulation the entire economy, the banks are still constantly kept in guidelines of the Monetary Authorities.
The 1957 report of J.B. Loynes of the Bank England paved the way for the establishment of the Central bank of Nigeria.
This act was passed on 15th May, 1958 and the bank began operation on the 1st of July, 1959 with an authorized capital of N1.5million of which N1.25million was paid up.
1.2 STATEMENT OF PROBLEMS
Organizations are formed to achieve some of the organizational goals. In a private or profit making as much s possible while public enterprises are mainly created to render services tot he public. which ever role, the organization is set to achieve, it must need some resources to go about it. Those resources includes money, man, material and machine.
Usually, these resources are entrusted in the hands of some employees of the organization.
The tendency is that some of the resources are misappropriated and the policy, rules and legal requirements not complied with.
As a check on this, management may set up a controlling aspect, which will be charged with the responsibility of monitoring the activities of the employees and effecting management control.
The application or to what extent these roles are carried out by the controlling arm of management is hence the problem which this work is set to investigation. The study also centres on finding out how to improve the bank controlling policies of customer’s account as a means of increasing the chances of average Nigerians in opening an account with the commercial banks.
In summary, the problem of this research is to find out the extent to which the sample back (CIB) has installed an adequate controlling system over customer’s account as a means of guarantee customers trust and patriotism.
1.3 OBJECTIVES OF THE STUDY
This research work studies the controlling of customer’s Account by the commercial bank using Citizens International Bank as a case study. More specifically, the objective of the study are: –
To find out the roles which management can play in controlling of customer’s account.
To find out the ways that the bank operates various customer’s account..
To find out the effect of not having a good management policy for controlling customer’s account.
1.4 SIGNIFICANCE TO THE STUDY
The significance of the study is that it will highlight the importance and consequences of not having an adequate design of controlling thing principles by the commercial bank.
Some of the benefits that may accrue from this research work are as follows: –
Banks will benefit from this study through the increase in patronage of their services to their various customers.
The banks are in business to make profit and will face immediate collapse if their services are not patronized. This study, by seeking the means of increasing patronage of the various bank services through improved controlling policies therefore has a lot of significance to the banking industry.
The masses will equally benefit from this study because implementations of the findings and recommendations in this study will ultimately lead to improved standard of controlling customer’s account which will make the masses to have trust on the commercial banks.
1.5 SCOPE AND LIMITATION OF THE STUDY
This study basically covers the controlling policies of commercial banks. However, the researcher being a student combining this research with other academic work and also as a result of other constraints such as communication barrier, time factor, money and so on, the scope of this study has been limited to only CIB Ltd.
The researcher believes that the findings and recommendations made herein will be applicable to other commercial banks in Nigeria because the commercial banks of study has some features which are representative of a typical commercial bank in Nigeria.
The researcher was faced with a number of problems in the process of carrying out this research study and much obstacles had contributed to the limitations of the entire research work. Some of the constraints encountered includes:
(a). SECRECY AND RELUCTANCE OF RESPONDENTS:
The unwillingness of the Bank officials to disclose some piece of information that are vital to this study which they classified as being secret. They reminded the author of the professional and promised secrecy in their business ethics.
The researcher tried many times to ascertain various piece of information from the bank but was turned back on the condition from Onitsha central the head office for south east 2.
The researcher visited that branch and Enugu branch and this solved the problem to an extent.
(b). TIME FACTOR:
Time was one of the greatest limiting factor in carrying out this research work because the research had be to carried out concurrently with the normal lecture hours.
Availability of funds certainly contributed in determining the researchers area and spread of investigations, obviously, the number of visits to the bank’s branch offices. Secondly, prices of all materials needed for the work and its production had sky-rocked to almost 12 times their prices in the recent past due to inflation.
(d). LOW LITERATURE RATE:
Banking education being relatively new in Nigeria, not much work has been done directly in the area of this study. As a result, the researcher mainly relied on personal interview marathon lectures. Inspite of all these constraints, it is hoped that this research study will make meaningful contributions into the controlling policies of customers account in Nigeria.
1.6 RESEARCH QUESTIONS
1. Do the control of customers account help the customers in any way?
2. Does it have any effect on the side of the bank?
3. Do you think that the measure mapped out by the commercial banks will help in any way to control or curtail fraud and irregularities in the bank?
4. Which of the measures – like the cuterial control, operations, customers services unit etc. do you think will be best for this control.
5. What are the hindrances to the commercial banks in controlling the customer account?
There is one major hypothesis that forms the root of this study. The findings will lead to acceptance or rejection of these hypothesis i.e. Null hypothesis (Ho) which will be rejected or accept the alternative hypothesis (Hi). For the purpose of this study the under listed statement of hypothesis will be tested.
(i). Null hypothesis (Ho): The control of customers account do not help the customers.
(ii). Alternative hypothesis (Hi): Control of customers account helps the customers.
B(i): Ho: The controls has an effect on the side of the bank
Hi: The controls has no effect on their side.
1.8 ASSUMPTION OF THE STUDY
In compiling the findings from this study, it is assumed that all the information supplied by the people interviewed and that the responses are true and fair representation on of their opinion about the issue raised.
1.9 DEFINITION OF TERMS
1. BANK: It is an establishment which deals with money, receiving it on deposit from customers honouring customer’s drawing against such deposit on demand, collecting cheques from customers and lending or investing surplus deposits until they are requested for payment.
2. CBN: Central bank of Nigeria
3. CIB: Citizens International Bank Limited
4. ICAEW: Institute of Chartered Accountants in England and Wales.
REVIEW OF RELATED LITERATURE
2.1 WHAT IS A BANK
To a layman, any place or thing (including a wooden safe) where money is kept safe is a bank. Because of this misconception, an understanding of banking habits is called for a good understanding of what a bank is.
Of course, there are as many definitions as there are authors and banking texts.
However, a close look at he following will help.
A simple definition of a bank sates that a bank is “an establishment which deals in money reviewing it on deposits from customers, honouring customers drawing against such deposits on demand, collecting Cheques for customers and lending or investing surplus deposits until they are required for payment”.1
Following the enactment of the first banking legislation in Nigeria in Nigeria in 1952, the first legal definition of a bank and banking business emerged.
The banking ordinance of 1952 defined a bank as “ any company carrying on banking business or using “bank” or “banking” as part of the title under which it carries on business”2
It also defined banking “as a business of receiving from the public on current account money which is to be repayable on demand by cheques and of making and advances to customer’s3.
The definition implies that once a company adds the words “bank” or “banking” in it’s name or runs current account and gives loan, it is a bank.
Furthermore, the 1958 banking ordinance (which was emended in 1962) defined banking as the business of receiving money on current account, of paying and collecting cheques drawn by or paid in by customers and making advances to customers”4.
Infact, except for the slight change in phraseology, this definition is the same as that contained in the 1952 ordinance.
The decree provides a legal definition that is currently applicable in Nigeria.
According tot he definition in section 41, subsection 1 of the Nigeria Baking decree 1969, a bank means “any person who carries on banking business and include a commercial bank, an acceptance house, discount house and other financial institutions”5.
Paragraph (a) of the same subsection went on to define commercial banks as any person who transacts banking business in Nigeria and whose business includes the acceptance of deposits drawable by cheque” 6.
This definition is very useful and functional, one because it tells the type of banks and states the primary function of a commercial bank “acceptance of deposits”. Also by including the word “person” in the definition, it recognizes the human element in banking.
On what is a banking business the banking amendment act No. 3 of 1970 further defined banking business as a business of receiving monies from outside source as deposits, irrespective of the payment of interest and the granting of money, loans and acceptance of credits or the purchases and sale of securities for account of others or the in carrying of the obligation to acquire claims in respect of loans prior to their maturity or their assumption of guarantees for others or the effecting of transfer and clearing and such other transaction as the minister may, on the recommendations of the central bank order publish in the Federal Gazettes, designate as banking business” 7.
From this definition, it can be implied that the payment of interest on deposits in not compulsory, although it is still payable on some classes of accounts. It also implies that the government has the power to include any other thing as banking business.
The forgoing definition help us to understand that banking is a business and as such no person should be regarded as a bank except he carries on banking business.
Contrary to what is obtained in the rural areas where some individuals who keep money for others are regarded as banks.
A person or corporate body cannot claim to be a bank unless he is registered and granted licence for the business of banking.
In trying to describe banking as a business, Lawal (1983), put is in this form “Banking is a business, it provides certain services for it is customers ……
It tries to earn a profit for it is stock owners and can be defined as a dealer in money and credits, holding itself out to receive from the public deposits payable on demand by cheque” 8.
2.2 ORIGIN OF BANKING BUSINESS
Infact, the origin of banking is somewhat under but it is believed by many authors that it originated at London.
Turnover (1969), stated that commercial banking originated with the London Goldsmith of the seventeenth century, and since then has had a rich and complex history”. In his own contribution, Adekanye Femi (1983), pointed out that banking business and its origin in the middle ages when goldsmith in England, by the nature of their business had good storage systems for gold and other valuables. People restored to lodging their raw gold with the goldsmith and were issued receipts in different denominations. This bearer receipts could be used by the holder, in exchange to goods/services claim over the gold lodged with the goldsmith.
This was how a rudimentary banking evolved.
Contrary tot he above view on the origin of banking Vaish M. C. (1977), pointed out that in it’s naira form, banking is as old as authentic history and the origin of Modern Commercial banking is traceable in Ancient times. The new testament (of the bible) mentioned about the activities of money changers in the temple of Jerusalem ….. ; you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest:.
In this regards, Crowther, Geoffery (1958) simply stated that “ the goldsmith ancestry of modern bank is purely an English affair.
However, the Goldsmith ancestry provides better explanation of the area of controlling customers account. As a result, majority believes that banking originated from the London goldsmith to what we have now, the modern banking system. Hence the need for the study controlling of customers account by the commercial banks.
2.3 ESTABLISHMENT OF CITIZENS
INTERNATIONAL BANK LIMITED
Citizens International Bank Ltd. Commercial business on May 1990. Within this period, they have grown not only steadily but also in leaps and bounds.
The bank, a private limited liability company continues to operate within its legal trinities of providing commercial banking services to government and its agencies, institutional, commercial and individual customers.
Presently, the bank maintain 49 branches and numerous cash centres yet to be established.
Due to the banks’ various expansion programmes and the need to keep updating its machinery in maintaining contemporary information technology by acquisition of a brand new back-up offsite server, which has sustained its leading position in banking technology. They also continued to invest in new vehicles for its personnel improve on it’s marketing drive.
Further investments were in fixed assets at the new branches and cash centres, which were opened.
In essence, their mission as a financial institution is to make a meaningful contribution to the Nigeria economy in general and the banking industry in particular by “becoming a prosperous financial services organization that will ensure over a long term”.
From inception, they recognized that a cash based economy such as Nigeria’s requires automated banking which would allow business transaction without the necessity of having to carry huge sums of money. They have responded by establishing a fully automated bank with branches liked tot he head office in a computer network, thus saving their customers the risk of carrying cash from town to town. The system allows their customers to draw on their deposits and transact other banking business from any of their branches, no matter the branch in which they maintain operations.
CIB believes that progress in their industry is technology driven. I response to this, they have invested tremendously in technological infrastructures in order to meet and ultimately exceed the customers expectation.
They have acquired a high profile MRS 6000 580 servers with stupendous capabilities for enhanced quality service delivery.
In addition, they have put in place an independent telecommunication network based on the very small Aperture Terminal (VSAT) and original radio technology for looking up all their branches to a Wide Area Network (WAN).
Way back in 1991, the management of CIB decided to have branches outside Lagos with a view to extending their well tailored services to other states in the country.
In pursuance of this objective, Citizens Bank has invested substantially in infrastructures that reflect their determined focus on customer professionalism, integrity and excellence in the conduct of their business.
They believe that the sole reason for their existence is to provide service to their customers and this they have consistently pursued by their deliberate and planned branching policies and profile. The customer, therefore to a large extent must dictate their activities as an organization. They strive to be alive tot he changing needs of the customer and the market place and so adopt their structure, systems and product offerings to meet these needs.
It is by responding to the needs of the market place that they get their relevance as an organization. Invaluably, these considerations elicit in them the desire to bring their services tot he doorsteps of their customers.
Besides, for an industry such as this, branching is synonymous with growth and to grow one needs to be adaptable to one’’ environment. From a one-branch office (Broad street) in 1990, the bank by the end of 1995 had established 11 (eleven) fully automated branches linked on-line, real-time, with one another and the head office. Today, their market coverage and branch network stand out impressively, spanning through the four cardinal geographic coners of Nigeria.
The first port of call was the Onitsha Market.
Onitsha branch started operations on July 29, 1991. The reason was to harness the economic potentials of the ever bubbling town which doubles as a commercial nerve center and strong trade link between all major commercial cities all over the country.
Having taking the lead, the bank quickly diversified and extended its tentacles further in the east, west, north san south. Kano branch came on board in September 1991 with an initial staff strength of 12. They later pitched tent in Aba and recognized its potential as a highly ingenious and versatile environment. It was because of this that they opened shop to customers in Aba on the 2nd day of September, 1992 with a pioneer staff strength of 6.
Their port-Harcourt branch commenced business in 1999 and was conceived as a partner in progress to tap into the rich economic resources of the city and to contribute to the wealth and growth of the customers.
Lagos, which still remains the epitome of business and commerce in Nigeria and by extension the West Coast, expectedly has a fair representation with 15 branches and cash offices in locations considered straight and advantageous.
For CIB branching to bring their products to their customers doorsteps has remained a tradition.
2.4 THE ACTIVITIES OF CITIZENS WITH BANK LIMITED
The bank, a private ltd. liability company continuous to operate within its legal franchise of providing commercial banking services to government and its agencies, institutional, commercial and individual customers.
The bank shares are all privately held in accordance with the Articles of Association of the bank. The bank has no beneficial interest in any of its shares.
The endeavous to lessen the plight of the community by providing gifts and donations to worthy organizations.
They used to donate enough to charitable organizations and educational institutions.
The bank is appropriately divided into teams/groups, branches and support groups effectively interconnected to ensure seamless connectivity and organized service delivery.
The teams and groups are as follows: –
Commercial banking, corporate finance, institutional banking, treasury, transaction services, private banking, internal control, financial control, fincon, retail banking group etc.
i. COMMERCIAL BANKING:
Citizens is unswerving in its commitment to the growth of the banking sector which remain the crux for financial growth and development in the country.
The group which is represented in the above comprises marketing teams that provide financial service to virtually all strata of our macro-economy.
ii. CORPORATE FINANCE:
They serves the customer by providing financial
advisory service and provision of alternative financing options through tripartite and off balance sheet bases.
iii. INSTITUTIONAL BANKING:
The mandate of the group is to provide banking and financing services to multinational firms, large and local corporate organizations etc. They seek at all times to provide effective solutions with a flexible range of services, products and initiatives which demonstrates true understanding of the customers business and the operating environment.
The treasury group has evolved into effective money managers in handling the assets and liabilities of the banks.
v. TRANSACTION SERVICES:
This group has been playing a leading role in revenue collections for federal and state government and in other GSM operations.
vi. INTERNAL CONTROL:
The primary responsibility of this group is to ensure that the business is carried but in an orderly and effective manner within the prescribed policies and guidelines – both internal and external.
vii. FINANCIAL CONTROL:
Their function is strategic tot he efficient management of the entire bank. They presents on daily basis financial information necessary for decision making while being charged with the responsibility of rendering vital statutory returns.
This is a department under the managing director group. It’s operations can be broadly grouped into three functional roles – management information, system, regulatory/tax compliance and budgetary control.
ix. RETAIL BANKING GROUP:
This unit was created in April 2001. The focus of this group is to provide excellent banking services tot he retail end of the market.
2.5 WHAT CONTROL IS ALL ABOUT
By controlling, it means the action or measure by which the superior monitors or checks current operation and compares result with goals and other standards of performance established during the planning function.
If from the check, it is seen that current activities and/or result deviate from original plans or standards corrective action is required to get things back on path.
So the establishment of standards, the comparison of performance with standards set at the planning stage the feedback of any deviations from the standard are all factors that come within the embrace of controlling.
Infact, controlling is one of the major functions of management. It ties together the performance of the various managerial functions to ensure that such performance achieve expectations. Controlling is a check to see how well performance is confirming with the objectives and plans as well as how well the organization is fulfilling equitable share of responsibility.
Controlling also check the way directing is done at identifying deviations in the performance of any of these functions so that identified deviation might be corrected.
“Planning and controlling are basic but closely related parts of the management process”. Planning no matter how good it may be is no guarantee of success.
Hence management need to take definite steps to keep things headed in right direction. Controlling does this and complements planning by introducing corrective actions as the plans are being implemented.
Controlling has been neglected and least understood as an area of management activity. It’s managerial role has often been mistakenly considered to be synonymous with financial control.
In such a frame of reference, it has been frequently been regarded as the sole domain of the accountant or controller and in turn, completely equaled with such technique as budgets and financial ratio.
Control is made up of four definite steps which must be applied regardless for the activity being managed.
They are: –
(a) Establishment of standards which is done during the planning function.
(b) Measure of performance.
(c) Comparing the performance against standards and as certainty different if any.
(d) Correcting unfavorable deviations from standards.
“A frequently used definition of standards of performance is a statement of conditions existing when a job is performed satisfactorily”.
Planning and controlling are highly related and it is not easy to write on controlling without saying anything about planning. Planning is a delineation of goals, predictions of potential results under various ways of achieving goals and decision of how to attain the desired results.
It should be noted during setting of standard, one will not set a standard that cannot be achieved easily. Such a standard is called an ideal standard. It reflects estimates of what should happen under perfect conditions. It is formulated with the best possible operating circumstances in mind equipment will work at full capacity and according to specifications, there is no room or idle time, rest time or machined break down no allowance is made for normal waste or black out. Such standard is also called perfection or maximum efficiency standard since they may only be attained under perfect conditions and maximum efficiency. Indeed they are not expected to be attained in practice by the average worker working at his best. This they are called theoretical standards. They philosophical rational for such standards is that they provide the highest performance objective. As workers continue to strive towards their efforts keep improving and the objective of control is met. A team composed of merely average workers however may face the danger of fixation if confronted with ideal standard.
Fixation is psychological phenomenon of being frustrated due to past experience of trial and failure. In that situation, the worker will resist every effort to change.
When workers consistently fail to achieve the standards, they may develop feeling of hopelessness. The sincerity of management becomes in doubt and workers may perform in complete disregard for the existence of such standards.
Motivation becomes negative and actual output will no longer represent the workers best efforts.
Control cannot be achieved in the circumstances. However, if the standard is too loose, it will not motivate the workers to workers to work hard to achieve the goal.
2.6 TYPES OF CONTROL
Having covered the general principles of control, it is now necessary to examine the particular characteristics of control level at various level in the organization.
(a). Operational control
(b). Management control.
“Operational control takes place at the operational level of the organization and is structured, repetitive procedures”.
This system occur at lower levels of the organization and are based on unambiguous, clear data of quantitative or financial nature. A typical example being a computerized inventory quantities and other control levels are calculated automatically according to precise rules. By their nature, operating controls are repetitive and short term or often use quite complicated formal models.
The settling up of operational control systems requires considerable technical skill and advice from functional specialists, accountants, industrial psychologists is invariably required.
Management control systems are procedures and systems that will ensure that top management policy divisions are put into practice throughout the organization down to the level of operations.
The management level ranging from operational control at the lower end, through the tactical level and up to the strategic planing level.
It follows room this that there is more than one level of management involved, ranging from people above supervisors up to the top management.
One cannot really talk of controlling without taking a look at the principles of management by exception. The principles states “that effectiveness of control demands that management should identify points of exceptions that is small deviation from plans which are not very significant and can be over looked. That management should focus on the major deviations for correction.
The principle permits sub-units to maintain self control, which can produce a motivational factor form a feeling of trust in the ability of the subordinates to execute responsibility.
This principle has the purpose of allowing mangers more efficient results of the control function over the total system.
Controlling of customer’s account by the commercial banks is often done by the management of the bank. It is the management that knows the principle that it will use in achieving this aim. for this reason, the bank operates a system of control known as internal control.
Internal control means the control of the whole system, financial and otherwise established by management in order to carry on the business of the enterprise in an orderly and efficient manner, to ensure adherence to management policies, safeguard the assets and secure as far as possible the completeness and accuracy of records. the individual competent of an internal control system is known as “control’.
Accounting and financial controls would generally consist of:
i. A system of internal checks, counter checks and balance operating in a multiple effect and routine manner, installed and maintained to prevent or at least minimize errors or fraud.
ii. Internal accounting and financial policies procedures and regulation encompassing recording, safeguarding, reconciliation and valuation of transactions.
iii. Internal planning and control system sand procedures which are often formalized for ease of operation.
iv. An internal monitoring, review and audit unit charged with at least, the three specific functions listed above.
An internal audit section is important as an aid to management in enforcing and obtaining compliance with laid down procedures.
When one is planning a standard, the standard has to be adequate in design, effective in operation and consistency in application.
2.7 ICAEW AND NOEM’S SYSTEM OF CONTROL
It is necessary at this point to introduce some aspects of the appendix to a statement of auditing dealing with control issued by the institute of Chartered Accountant of England and Wales (ICAEW) and that of NOEM’s information on financial analytical system for strategic decision making of a commercial bank.
A. On general financial arrangements involved in instituting a system of control, the statement says:
1. There is need to devise an appropriate and property integrated system of accounts and records.
2. Ensuring that adequate precautions are taken to safeguard important records if necessary to duplicate and store them separately.
3. Finally, engaging, training and allocating to specific duties management competent to fulfill their responsibilities.
B. On custody and control of money received the statement says:
1. Money received should be subject to adequate safeguards and controls at all stages up to lodgement in the bank safe.
2. The appointment of suitable persons to be responsible at different stages for the collection and handling of money received with clearly defined responsibilities.
C. On cheque payment:
1. What is the procedure to be adopted for controlling the supply and issue of cheques for use and who is to be responsible for their safekeeping.
2. Who is responsible for preparing the cheque
3. What documents are to be used as authorization for preparing cheques and presentation of cheque, steps to be taken to ensure that payment cannot be made twice on the strength of the same document.
4. The names, numbers and status of persons authorized to sign cheques, limitations as to their authority, the minimum number of dignitaries required for each cheque, if more than one signatory is required, how will it be ensured that those concerned will operate effective independent securing.
5. Safeguards to be adopted if Cheques are signed mechanically or carry printed signatures.
6. Arrangements for the prompt despatch of signed Cheques and precautions against interception.
D. On wages and salaries being paid by cheque or bank transfers, the guideline says, that there is need to determined which persons are:
1. To prepare
2. To sign cheques and bank transfer list preferably these persons should be independent of each other and of those responsible for preparing pay sheets.
E. On deduction form pay in D above, the guideline postulates that appropriate arrangements should be made for dealing with statutory and other authorized deductions from pay.
A primary consideration is the establishment of adequate over records authorizing deduction. There is also need to cross totals of gross pay and tax deducted as shown in inland revenue or the appropriate establishments with relevant totals on the payroll and how often the cross checking is done.
Information system NOEM is an important contribution to controls exercised by the top management level and acts as an effective internal control tool for commercial banks which complies with the legal principle of the “audit trial”. It enables the tracking of the accounting contents with original operations. The presented system can be applied by bank internal audit personnel as a technical instrument for fast and exhaustive control of adverse deviations and anomalies.
NOEM, an information and financial analysis system stemming from the bank’s accounting values, represents a constant decision- making support because it reveals interrelations between individual aggregates or structural entities of the balance sheet and the profit/loss accounts either on a monthly basis or upon user’s request. NOEM provides the executive management with all the necessary elements of financial analysis leading first to the specification of the state of the bank before a decision has been taken and later to the control of its effects on the bank’s evolution while closely relating and analyzing the risk against performance.
NOEM keeps track of the chronological evolution of the indices based on the implemented trend analysis and enhanced by their graphical representation. Recognition of a decrease and or possible trend change forecast represent sufficient warning signals to attract the full attention of the executive management to such areas where immediate measures/corrections are needed. The purpose of the NOEM outputs in the first phase is to create aggregate groups of both balance sheet and profit/loss accounts allowing for immediate and regirous operational analysis of bank activity. The method applied is similar in nature to that used in a company value assessment process.
2.8 INTERNAL AUDIT STANDARDS FOR COMMERCIAL BANKS
Internal Audit Standards are acceptable criteria for measuring the professional qualities of internal auditors.
The Internal Audit Department of each commercial bank shall comply with the internal audit standards prescribed by the National bank of Georgia for the following purposes:
a. To impact an understanding of the role and responsibilities of internal audit to all levels of the bank’s management.
b. To establish a basis for guidance and measurement of internal audit objectives, internal audit performance and professional qualities of the internal auditors.
The internal audit standards, which each commercial banks shall adhere to, encompass the following:
i. The scope of internal audit activities.
ii. The management of the department.
iii. The independence of the department from the activities audited, and the objectivity of internal auditors.
The scope of the internal audit should cover the assessment of the adequacy and effectiveness of the bank’s system of internal control and the quality of management’s performance in carrying out their assigned responsibilities namely:
a. Follow up to ascertain that appropriate corrective action is taken in a timely manner, on reported audit findings and recommendations.
b. Establish plans to carry out the responsibilities of the department
c. Establish and maintain a programm (system) for accurate and true evaluation of the bank’s operations by the department.
d. The auditors should review the controls for safeguarding assets and, as appropriate also confirm the existence of such assets.
2.9 OPENING OF CURRENT ACCOUNT AND ISSUANCE OF A NEW CHEQUE BOOK
Current Account is the type of account that customer uses cheque for the operation. No notice is given before money is withdrawn from this account. The rule in this type of account is that it must always be credit except in cases where overdraft has been granted when, a limit is set up to which the customer can withdraw. The customer is charged interest on such overdraft.
In addition to this, banks also charge fees for services rendered to current account customers and the charge is called COT (Cost of Transfer/turnover).
In opening this account, the following procedure is followed. The customer must be well known by the bank. If not the customer is introduced by another person that is known by the bank officials.
The customer completes two specimen signature cards under the guidance of the customer’s services officer. In this stage, two copies of signature cards (individual or business) are given tot he prospective customer to complete.
The original is held by the current account department while the duplicate is held in the treasury. The customer submits three (3) passport photographs. If the bank is satisfied with the completed forms, will open an account. The bank will transfer the particulars on the signature card tot he corresponding section of the ledger sheets. Important particulars relating to the account must be shown on each ledger sheets and when full must be carried forward to the next page. Enter the particulars of the new account into the opened and closed account register and index register the customer should complete the teller (paying – in – slip) if any initial lodgement is to be made. The specimen signature cards and other reference forms completed by the customer operational habit always
It is essential to note that when lodgments are to be made into lodgment customers account, the following conditions must be completed.
Bank teller form must be used. Bank teller is what is used in depositing money into this account s the researcher has earlier said.
After filing in the denominating of each currency respectively in it’s column, a grand total is written. The paying in bank is then passed to the cashier for acceptance. The cashier checks the denomination of each currency respectively to know if it tellers with the amount written on the teller. All un-cleared effects are also to be recorded properly on the ledger sheets. The bank stipulates a rule that no withdrawal must be paid against un-cleared effect unless authorized by branch management.
Withdrawals by customers from their banks must be made by Cheques. The cheque book is given to the customer so that any time he wants to withdraw money he can easily teat one off from the cheque book. In this, the customer writes the amount he wish to withdraw and signs at the back of the cheque book.
Cheques should first be referred tot he customers services officer who should check whether the amount written in words corresponds with that written in figure and also verify the signature and the customers balance on the system to see if he has sufficient fund.
All this is done to know if there is nay error or whether his money is due for collection.
The CSU officer will now pass the cheque on to the teller that the one that is to pay the customer has signed where he suppose to sign and also check whether he has sufficient fund/amount in his account. If there is sufficient amount, the cheque is paid to the customer.
INSURANCE OF A NEW CHEQUE BOOK
Whenever the cheque book finished, it is the duty of the customer to apply for a new cheque book for his banking operation. The customer completes ”order for new cheque book” form.
The signature should be verified. The bank checks the customers account to make sure that the former cheque book has finished. This is done by finding out the number of times the cheque has been used to withdraw money from the account. If the CSU officer is satisfied, the cheque book is then printed and issued tot he customer.
2.9 OPERATION AND CONTROLLING OF SAVINGS ACCOUNT
Saving account is a kind of deposit account. It is not a running or checking account that is operated with cheque book. It is designed to encourage small savings in which interest is paid to attract customer’s. Like in CIB one can open this kind of account with N5,000 (Five thousand naira only). Any one who wishes to operate this kind of account with CIB should get his two copies of passport photographs and the initial deposit.
The Central Bank of Nigeria directs the commercial banks on interest to be charged. The rate varies depending on the CBN directories.
Keeping of savings account is very advantageous because, the money is safe and the bank pays you an additional interest on the amount been safeguarded.
The kind of account is also kept for unforeseen occurrence. The customer will be able to utilize the money properly then when he uses his own money.
In opening the account, the customer appears in person with the required document and fills one signature card. If the customer is an illiterate that he cannot fill the signature card, then the customer’s finger print will be obtained. The address and name are also necessary. The customer’s particulars are then transferred to the banks opened and closed account and where the branch maintains what is called index register.
The name of the customer should be entered there. It should be contained the name and address of the person that should be contacted in case of emergency. The person should be well known o the bank and all the things concerning him should be posed to the computer or system in case of emergency.
After the above, the bank will know put the name of the customer to a register book where every savings account data is being recorded.
A customer can send someone to deposit money as many time as possible on his behalf. However, in case of withdrawal, the customer must appear in person otherwise withdrawal cannot be made.
Although it is said that savings account attracts interest. This is only possible if the customer does not go contrary tot he stipulated guidelines. The underlying principle says that withdrawal should not be more than three times in a given month but where the customer withdraws more than that, the customer will loose interest for that particular month and yet will encounter a little charge that is called excessive operation.
In savings account, the ledgers are balanced periodically twice every month where as the interest element is being applied on monthly basis. There is what is called savings control where daily figures are consolidated with the general ledger. The person who consolidates this with the general ledger collects it’s figure from journal to build up the general ledger.
There is another book that is called saving abstract where individual balances are recorded each balancing period and it is also posted to the system each time deposit and withdrawal is made.
A minimum of certain amount must be retained in the saving account. If the customer wants to make withdrawal, he is not allowed to withdraw the last kobo in the account except if the customer wants to close the account. Like CIB Enugu branch, their minimum balance is N2,000 while Onitsha central is N500. Although some banks allows a minimum of N1,000 while others allows lesser than that but not to the last kobo. There is no stipulated amount that is left in the customer’s account for it fluctuate with the economy. This reduces the problem of where by some customers g to the ban everyday to withdraw only to come back tomorrow to deposit it in the bank.
2.11 OPERATION AND CONTROLLING OF LOAN ACCOUNT
The loan facility is mainly but not exclusively used by sole traders and individuals such as salary earners to help them over a difficult period. It may also be used to supplement the payment of school fees, medical bills, family commitments and some unforeseen expenses. The amount granted depends on the directive and it is repayable in the shortest possible time.
Ordinarily, banks are suppose to use their own descriptions in the disbursement of loan and advances in the economy but it is not so in Nigeria because banks are completed to adopt the statutory credit policy of the central bank of Nigeria which affects their ability to channel their loanable funds to the sector of their loanable funds tot he sectors of their choice.
When a loan is granted Mr. C, a new account tilled Mr. C account is opened in the books of the bank. This will be in addition to his normal current account. First, the amount of the loan will be debited to T’s current account either by a cheque drawn by him or by a debt voucher to draw the approved loan in cash. Then the current account will again be credited with the same amount, while the new account Mr. C loan account will be debited with the amount which will revert to it’s old position as it was before the loan was granted, while the new account (is loan account will carry a debit balance being the total loan granted to Mr. C.
If repayment is on monthly basis the loan account will be credited with the agreed amount every month, while the current account absorbs the debit. The deductions will continue until the loan is totally liquidated.
Repayment will also take into consideration the interest element. The interest rates are subject to changes form time to time and depending on the sector to which the money is lent coupled with central bank disentire guideline.
There are three types of loan facility given by te commercial banks.
1. Short term loan facility
2. Long term loan facility
3. Medium term loan facility
In short term loan, the loan is giving to finance an investment that will not last for more than one year. In this case, the loan is only used for temporary financing and the interest charged on this loan is usually very little when calculated.
Long term loan on the other hand is used to finance investment that will last for a lengthily period. It is usually for capital investment that takes long before the investment will start to recoup part of the invested capital. The interest rate when calculate is usually very high that the borrower may even find it very difficult to pay for that.
Medium term loan is between short term loan and long term loan.
Commercial banks are most frequently used source of short term funds by it’s customer. The fund that the commercial banks provide are in form of debt financing and as such require some tangible guaranty or collateral.
This collateral can be in form of business assets or assets of the consignor who will guarantee that the loan will be repaid.
In another way, the loans given to customers by the bank can be categorized in many other ways. These loans are generally based on either asset or cash flow of the customer. The asset base for loans includes account receivable, equipment or real estates.
Account reverable provides a good basis for loan, especially if the customer base for solid and credit worthy. Upon determination of the credit worthiness of the customer through investigation, a bank may finance up to 80% of the value of account receivable. When customer such as the government is involved, the customer can develop a factoring arrangement where by the factor (bank) actually buys the account receivable at a value below the face value of the loan and collects the money directly from the account. If any of the receivables are not collectable, the factor sustains the loss not the business.
The cost of factoring the account receivable is of course higher than the cost of securing a loan against the account revolved since the bank has more risk involved. The cost of factoring involved both the interest charged on the amount of money advanced until the time the account receivables are collected, the commission covering the actual collection, and the protection against possible uncollectable account.
Inventory is another form of the customer’s asset that is often used as a basis for a loan, particularly when the inventory can be sold easily. Usually, about 50 percent of the finished goods inventory can be financed. A unique type of inventory loan used to finance retailers such as automobile and appliance dealers are trust receipts. In trust receipts the ban advances a large percentage of the invoice price of the goods and is paid on a pro-rate basis as the inventory is solid.
Equipment can be used to secure long term financing can be of several types:
Financing the purchase for new equipment financing used equipment already owned by the company and lease financing.
When new equipment is purchased or present owned equipment is used as collateral, usually from 50% to 80% of the value of the equipment can be financed, depending on the salability.
In lese financing the customer sells the equipment tot he bank and then leases it back for the life of the equipment to ensure it’s continued use.
2.12 OPERATION AND CONTROLLING OF A FIXED DEPOSIT ACCOUNT
This is a branch of deposit account. It is mostly kept by customers who want to earn a higher rate of interest of who like to keep their money for months or years without withdrawal.
It is possible to open a fixed deposit account for three months, 6,9 or a year and above. Such deposits attract a higher rate of interest as the number of months increases. No reference is needed to open a deposit account so it is relatively easy to open. The customers keeps the receipt until the day of withdrawal.
Deposit of money is done once the specific months or years that he customer whishes to keep the amount is specified. A renewal can only be made after the maturity date. A writing from the customer will be obtained authorizing the bank to extend the term.
A notice must also be given tot he bank during the withdrawal of fund. Here no cheque book is used to operate a fixed deposit account. It only attracts interest if the amount stays till the maturity date.
2.13 GENERAL METHOD OF CONTROLLING ALL THE ACCOUNTS MENTIONED ABOVE
While specific type of controlling the customers account has been analyzed on individual basis, it will be of much help to analyze the general procedure for controlling all the customer’s account.
(1). SIGNATURE: Signature is the major aspects of controlling customer’s account. In any transaction between the bank and the customer, the bank always checks the signature to know if it corresponds with the signature in the bank. Controlling of savings account is always easier because the customer comes to do the transaction in the bank himself.
However, when the customer fails to sign the exact nature of the signature, the customer is often mandated to sign the signature again otherwise the customer is not allowed to withdraw money. This is because the customer may put up a quarry saying that the money was withdraw by another person.
In current account, the customer does not appear in person to withdraw money so it is always harder to control this account. Once a mistake is signature is made, the cheque is marked dishounoured and one may be asked to change his signature if the customer finds it very hard to sign the specimen of the signature in the bank.
(2). VOICE: It is the duty of the bank to master the voice of it’s customers. When a customer makes a phone call to find out certain ting from the customer’s account, the bank does not give him any answer unless the bank is quite sure that it is the customer that is making the call.
“This helps to safeguard the customer’s account”. If the bank can’t prove if it is the customer that is making the call, the person will just answer the customer “please I don’t know:.
(3). TELEPHONE: Some customers of the bank give the bank an instruction not to honour their cheques without making an enquiry if the cheque was written by them or if the customer wants the cheque to be hounoured.
In this case, if the cheque is presented in the bank the bank has to make a call to the customer to find out if the cheque will be honoured or not. If the customer directs the bank to honour the cheque then the cheque will be honoured.
(4). CHEQUES NUMBER: The bank gives current account holders cheque book that is numbered chlorogically. Any time the customer writes a cheque, the number in the cheque is noted. “If at any time, the number in the cheque the bank receives is not in the right sequence, the bank has to ask the customer to explain what happed to the cheque before that one”.
This helps to find out if the cheque was stolen by somebody without the consent of the customer.
(5). OPERATIONAL HABIT: The bank often tries to find out the operational habit of the customers. “In a savings account, if the customer does not give people an authority to withdraw money from the account, then the bank will never allow any person who has a letter of authority to withdraw money from the account without first of all try to call the customer through any possible means”.
In the current account controlling, if the bank receives a cheque stating an amount that is so big that the customer. This will help to find out if the cheque book is under the control of any other person.
(6). THE PICTURE IN FIXED DEPOSIT: The customers of fixed deposit account holders are always giving certificate after depositing the amount. This is done in order not to allow another person to collect the money at the due date, the bank insists that depositors have to submit their passport to the bank. This passport will serve to control the withdrawal of the money.
(7). NO GAP AFTER WRITING THE AMOUNT: “The bank insists that customers should always write the amount they with to deposit or withdraw in a manner that no space will be left”. This will prevent another person form inserting any other figure or word in the space. An instance was given where by a customer after writing one hundred naira in his cheque but later the sum of one thousand naira was withdraw from his account by addition of zero to the amount written earlier.
(8). AUTHORITY TO COLLECT MONEY: The bank does not easily sanction an authority to collect money from the bank. This is to reduce the act where by some people forge the authority to collect money from the bank. This mostly happens in savings account.
According to Sam Okorocha, we don’t allow people to use the authority to collect money for another person”. The manager also narrated instances where by children forge their parent’s signature in order to collect money that was not authorised by their parents.
(9). HIDING SIGNATURE AWAY: The bank does not allow people to see their customers signature.
There are some people who can easily forge signature that does not belong to them once they are allowed to see the signature.
In view of this, the bank locks the signature cards away that only few staffs have access to it.
(10). SECURITY ON CUSTOMER BALANCE: No person is allowed to se a customer’s balance in the bank or is allowed to look into the system when calling up the customer’s balance. This helps to prevent people from knowing the customer’s financial abilities.
4.1 PRESENTATION AND ANALYSIS OF DATA
In this chapter a general summary of all the data gathered for this research work is analyzed and interpreted. The data is made up of the interview conducted with the staffs and managers of the bank through the questionnaire distributed.
From the responses collected from the respondents the research was able to provide answers to some research questions.
SUMMARY OF FINDINGS AND CONCLUSION
1.10 SUMMARY OF FINDINGS
In trying to make a general summary of the findings of this research work, emphasis have to be made on the statement of major problems stated earlier on.
From the analysis of data collected which was done in chapter four, the following financing and administrative controls were identified.
In the real sense, controlling of customer’s account starts the moment the customer wishes to open an account with the bank more CIB uses the following controls.
(1) The bank has an organizational and departmental plan called organigram. It ensures that there is clear division of authority, clearly designated responsibility and duties among the commission employees.
The organogram also ensures that all transactions are authorised by the appropriate person.
(2) To ensure efficient control of customer’s account, many people participates in every transaction and consequently the work of one person depends on the work of another person, each person has an incentive to demand efficient control from the other person.
(3) The internal audit carried out by the bank ensures that customers are not losing their money through fraudulent act of some of the workers who have criminal tendency.
(4) The banks also check and monitors transfer of money from one customer’s account to another account. In certain cases, CIB does not even transfer money out from customer’s account without notifying the customer before the transfer.
(5) Also, there is existing accounting regulation for controlling customer’s account which serves as guideline for the controlling of customer’s account.
(6) The management ensures that all data e.g. authorization note which is used in customer’s account transaction is stored away in many places as evidence that transaction has taken place.
The researcher proposes the following recommendations to improve the overall control of customer’s account by the commercial banks.
Whereas this study has added to the existing literature on this topic, the extent of courage has been limited due to some constants as shown in figure 1.5. The researcher therefore, recommends that more studies should be carried out on the controlling of customer’s account by the commercial banks in Nigeria. This means that the researcher also suggests that this present research work be repeated with other banks.
The bureaucratic process involved in banking operation between one customer and the other can also be speeded by employing highly qualified staff and stipulating time limits for each transaction.
Banks have decided no the disclose all the methods they use for controlling customer’s account. In view of the above, the government should mandate all the commercial bank to write out al the methods they use for controlling customer’s account.
Expertise will then find out if methods are adequate in design, effective in operation and consistency in application. Controlling of customer’s account is very important in the commercial banks because if not properly handled will lend to fraud in the commercial banks.
This research work on the controlling of customer’s account by the commercial banks noted that the bank under study controls customer’s account is not in doubt.
One area of difficult is that it was difficult for the researcher to carryout a compliance test to know if the control is carried as prescribed.
This means that one of the principles of standards which says that the standards for control should be adequate in design, effective in operation and consistency in application was not tested.
However, apart from the above, it can be said that the bank has installed an adequate controlling methods on the customer’s account.
Commercial Banks – Controlling Of Customer’s Account (A Case Study Of Citizens International Bank Ltd.)
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