BUAD 811 Note

DISTANCE LEARNING CENTRE
AHMADU BELLO UNIVERSITY

ZARIA-NIGERIA.
COURSE MATERIAL
FOR
Course Code & Title: BUAD 811: Financial System and Bank
Management
Programme Title: Master in Business Administration (MBA)
1
COPYRIGHT PAGE
© 2018 Ahmadu Bello University (ABU) Zaria, Nigeria
All rights reserved. No part of this publication may be reproduced in any form or by any
means, electronic, mechanical, photocopying, recording or otherwise without the prior
permission of the Ahmadu Bello University, Zaria, Nigeria.
First published 2018 in Nigeria.
ISBN:
Ahmadu Bello University e‐Learning project,

Ahmadu Bello University
Zaria, Nigeria.
Tel: +234
E‐mail:
2
COURSE WRITERS/DEVELOPMENT TEAM
Subject Matter Expert (s)

Dr. Mustapha Abubakar
Jamilu Abdulkadir
Subject Matter Reviewers

Prof. Abiola Awosika
Halima Shuaibu
Language Reviewer
Yusuf Musa
Instructional Designers/Graphics
Nasiru Tanko
Ibrahim Otukoya
Editor
Prof. Adamu Z. Hassan
3
QUOTE
“Open and Distance Learning has the exceptional ability of meeting the challenges
of the three vectors of dilemma in education delivery – Access, Quality and
Cost”
‐ Sir John Daniels
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TABLE OF CONTENT
Title Page
Acknowledgement Page
Copyright Page
Course Writers/Development Team
Table of Content
INTRODUCTION
Preamble
i. Course Information
ii. Course Introduction and Description
iii. Course Prerequisites
iv. Course Textbook(s)
v. Course Objectives and Outcomes
vi. Activities to Meet Course Objectives
vii. Time (To Complete Syllabus/Course)
viii. Grading Criteria and Scale
ix. Course Structure and Outline
STUDY MODULES
1.0 Module 1: An Overview of Financial Systems
Study Session 1: Nature of Financial Systems
Study Session 2: Financial Institutions I
Study Session 3: Financial Institutions II
Study Session 4: Financial Markets and Stock Exchange
Study Session 5: Financial Instruments I
2.0 Module 2: Financial Instruments
Study Session 1: Financial Instruments II
Study Session 2: Nigerian Capital Market
Study Session 3: Interest Rate Theories
Study Session 4: Structure of Bank Financial Statements
3.0 Module 3: Bank Management

Study Session 1: Bank Asset & Liability
Study Session 2: Loan & Credit Policies
Study Session 3: Bank Regulation & Regulators I
Study Session 4: Bank Regulation & Regulators II
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INTRODUCTION
i. COURSE INFORMATION
Course Code: BUAD 811
Course Title: Financial System and Bank Management
Credit Units: 3 Credit Units
Year of Study: Year 1
Semester: First
ii. COURSE INTRODUCTION AND DESCRIPTION

This is to welcome you all to this course on financial system and bank
management. I do hope that you will find the sessions interesting as you will find
in this course, a clear picture of the many terms you might have heard before now
and will hear in the future about financial institutions and their respective
functions. This course is essential for you in your chosen area of study as it
exposes you to many new concepts and terms used in financial circle in real world
situations. At the end of your study, you are expected to have acquired knowledge
and skills that can place you on expertise and entrepreneurial footing.
The Ahmadu Bello University MBA distance learning programme has been
developed to mold you into the caliber of manager needed to occupy vital positions
in the fragile, complex and ever changing business and industry environment that
transcends national borders. This course introduces you to concepts, theories and
terms and lays the bases for deeper understanding of the nature and workings of
financial system and bank management, with emphasis on institutions and the
institutional arrangements and operations carried out by each.
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Furthermore, being an integral part of the system, key considerations that are
pertinent in managing banks and overall regulatory framework for a financial
system and management of banks is also brought to limelight in the course of your
learning. The course is interactive in nature and involves reading, writing and
researching throughout the duration of the course. The approach will involve
eliciting your understanding through feedback mechanism which will among other
things require collective participation.
iii. COURSE PREREQUISITES

You should note that although this course has no subject pre-requisite, you are
expected to have:
1. Satisfactory level of English proficiency
2. Basic Computer Operations proficiency
iv. COURSE LEARNING RESOURCES

You should note that there are no compulsory textbooks for the course.
Notwithstanding, you are encouraged to consult some of those listed for further
reading at the end of each study session.
v. COURSE OUTCOMES
After studying this course, you should be able to:
1. Trace the evolution of a modern financial system and analyse its nature and
workings.
2. Identify the different types of financial institutions and elaborate on how
each of the financial institutions function.
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3. Distinguish among financial markets: money market, capital market and
assess the relevance of foreign exchange market in the discussion of
financial markets.
4. Examine the role of stock exchanges in an economy and discuss the roles of
stock brokers in facilitating exchanges in the market.
5. Evaluate scenarios that require informed decisions on the appropriate
investment option and source of financing for investors and issuers of the
financial instrument.
6. Evaluate a bank financial statement, and the structure of a balance sheet
and its use in financial decision-making.
7. Appraise any given credit policy, assess the loan portfolio of a given bank
and examine the implications of such policies on its operations.
8. Examine the issues that determine interest rate and evaluate the different
theories of interest.
9. Understand the purview of banking regulation, explain the role of the
different regulators in banking business and highlight and analyse the gaps in
existing regulations of banks
vi. ACTIVITIES TO MEET COURSE OBJECTIVES

This is a practical course which will involve a significant amount of reading,
writing and researching. In the course of learning, you will exert considerable
independent study and do your individual assignment while at the same time,
interacting with your colleagues and sharing the results of your efforts in short
essays/discussions. You are expected to work together on group assignments. In
doing that, please remember the basics of group dynamics (Forming, Storming,
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Norming and Performing) and try to quickly adjust in your team so you can begin
to perform for success.
Disagreeing with someone else, adding something others have either forgotten or
have not mentioned, or asking a question that raises a new, relevant issue, will be
beneficial to our discussions and is encouraged. Do not feel that disagreeing with
any of your course mates means you are attacking anyone, but rather that your
contribution will enrich the discussion. For a comprehensive understanding of any
material provided or referred to, keeping current with the reading is strongly
encouraged. Also, tutorials will be arranged within the two weeks on campus
activities in which questions will be clarified to enable you understand fully what
you’ve learnt.
Specifically, this course shall comprise of the following activities:

i. Studying courseware
ii. Listening to course audios
iii. Watching relevant course videos
iv. Field activities, industrial attachment or internship, laboratory or
studio work (whichever is applicable)
v. Course assignments (individual and group)
vi. Forum discussion participation
vii. Tutorials (optional)
viii. Semester examinations (CBT and essay based)
vii. TIME (TO COMPLETE SYLABUS/COURSE)

It is expedient that you patiently read through the study sessions, and consult the
suggested texts and other related materials. The study sessions contain self-
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assessment questions to help you. As such, you are advised to devote at least 3
hours every day for this course.
viii. GRADING CRITERIA AND SCALE

Grading Criteria
A. Formative assessment
Grades will be based on the following:
Individual assignments/test (CA 1,2 etc) 20
Group assignments (GCA 1, 2 etc) 10
Discussions/Quizzes/Out of class engagements etc 10
B. Summative assessment (Semester examination)

CBT based 30
Essay based 30
TOTAL 100%
C. Grading Scale (as appropriate for the course):

A = 70-100
B = 60 – 69
C = 50 - 59
D = 45-49
F = 0-44
D. Feedback
Courseware based:
1. In-text questions and answers (answers preceding references)
2. Self-assessment questions and answers (answers preceding references)
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Tutor led:
1. Discussion Forum tutor input
2. Graded Continuous assessments
Student led:
1. Online programme assessment (administration, learning resource,
deployment, and assessment)
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ix. COURSE STRUCTURE AND OUTLINE
Course Structure
WEEK/DAYS MODULE STUDY SESSION ACTIVITY
1 Study Session 1: 1. Read Courseware for the corresponding Study Session.

2. Listen to the Audio on this Study Session
Nature of Financial 3. View any other Video/U-tube (https://goo.gl/N2ftN7 )
Systems 4. View referred Animation (https://goo.gl/quj5Ur )
2 Study Session 2 1. Read Courseware for the corresponding Study Session.

Financial 3. View any other Video/U-tube (https://goo.gl/gxsbXH )
Institutions I
4. View referred Animation (https://goo.gl/24H996 )
STUDY
MODULE 1 2. Listen to the Audio on this Study Session
Financial
3. View any other Video/U-tube (https://goo.gl/gxsbXH)
Institutions II 4. View referred Animation (https://goo.gl/24H996 )

Financial Markets 3. View any other Video/U-tube (https://goo.gl/V4BpEv )
and Stock 4. View referred Animation (https://goo.gl/JAc15G )
Exchange
Financial 3. View any other Video/U-tube (https://goo.gl/SRDQ9q )
Instruments I 4. View referred Animation (https://goo.gl/UdpMwN )
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Financial 3. View any other Video/U-tube (https://goo.gl/SRDQ9q)
Instruments II 4. View referred Animation (https://goo.gl/UdpMwN )
STUDY
7 MODULE 2 Study Session 2 1. Read Courseware for the corresponding Study Session.
Nigerian Capital
3. View any other Video/U-tube (https://goo.gl/qUtJE1 )
Market 4. View referred Animation (https://goo.gl/Zt8iYu )

Interest 3. View any other Video/U-tube (https://goo.gl/K52iDi )
Rate 4. View referred Animation (https://goo.gl/BVgi35 )
Theories
Structure of 3. View any other Video/U-tube (https://goo.gl/8TvEjC )
Bank Financial 4. View referred Animation (https://goo.gl/e9y3xk )
Statements
Bank Asset & 3. View any other Video/U-tube (https://goo.gl/mHfiHa )
Liability
4. View referred Animation (https://goo.gl/91CbHh )
11 Study Session 2 Loan 1. Read Courseware for the corresponding Study Session.
& Credit Policies 2. Listen to the Audio on this Study Session
3. View any other Video/U-tube (https://goo.gl/PxXgj7 )
4. View referred Animation (https://goo.gl/wY5x7p )
1
12 STUDY Study Session 3 1. Read Courseware for the corresponding Study Session.
Bank Regulation 2. Listen to the Audio on this Study Session
MODULE 3 & Regulators I 3. View any other Video/U-tube (https://goo.gl/WEnoNp )
4. View referred Animation (https://goo.gl/tHfq7f )

Bank Regulation
3. View any other Video/U-tube (https://goo.gl/x1KDRe )
& Regulators II 4. View referred Animation (https://goo.gl/L2z9jz )
Week 14 & 15 REVISION/TUTORIALS (On Campus or Online)
Week 16 & 17 SEMESTER EXAMINATION
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Course Outline
MODULE 1: An Overview of Financial Systems
MODULE 2: Financial Instruments

MODULE 3: Bank Management

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STUDY MODULES
1.0 MODULE 1: An Overview of Financial Systems
Contents:
STUDY SESSION 1
Nature of Financial System
Section and Subsection Headings:
Introduction
1.0 Learning Outcomes
2,0 Main Content
2.1 - Financial System
2.2- Nature and Structure of Financial System
3.0Study Session Summary and Conclusion 4.0Self-
Assessment Questions
5.0Additional Activities (Videos, Animations & Out of Class activities)
7.0 References/Further Readings
Introduction:
In this study session, you will be introduced to the concept of financial system
which will form the basis of the discussions in the subsequent study sessions.
Financial system refers to a set of rules and regulations and the aggregation of
financial arrangements, institutions agents that interact with each other and the
rest of the world to foster economic growth and development of a nation. It does
this by providing a medium of exchange which promotes specialisation,
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mobilisation of savings from the surplus units and channelling them into deficit
units of the economy for productive capacity and overall output and
employment.
In Nigeria, financial system has evolved over the last few decades from a
rudimentary to a more sophisticated one, with numerous institutions and
operators facilitating the performance of the primary role of the system (i.e.
savings mobilisation and allocation of resources among competing units within
the system). Since independence however, new institutions and instruments
have emerged in response to the growing demands and needs for more
sophisticated financial intermediation functions locally. We now have a
growing number of financial institutions and other regulatory bodies as well as
myriad of financial instruments in the system.
1.0 Study Session Learning Outcomes

After studying this study session, I expect you to be able to:
1. Explain the nature of financial systems.
2. Discuss the structure of Financial System.
3. Differentiate the various institutions within the system.
2.0 Main Content

2.1. Financial System
Financial system refers to a set of rules and regulations and the aggregation
of financial arrangements, institutions agents that interact with each other
and the rest of the world to foster economic growth and development of a
nation. It does this by providing a medium of exchange which promotes
specialisation, mobilisation of savings from the surplus units and channeling
them into deficit units of the economy for productive capacity and overall
output and employment.
1
In Nigeria, financial system has evolved over the last few decades from a
rudimentary to a more sophisticated one, with numerous institutions and
operators facilitating the performance of the primary role of the system (i.e.
savings mobilisation and allocation of resources among competing units within
the system). Since independence however, new institutions and instruments
have emerged in response to the growing demands and needs for more
sophisticated financial intermediation functions locally. We now have a
growing number of financial institutions and other regulatory bodies as well as
myriad of financial instruments in the system.
The Nigerian financial system has continued to grow and expand. Despite its
growth and increasing diversification, the system in view of its evolving nature
is structured to enhance the following among others:
1. Facilitate effective management of the economy.
2. Provide non-inflationary support for the economy.
3. Be able to achieve greater mobilisation of savings and its effective
and efficient channeling to the productive sectors of the economy.
4. Effectively sustain the indigenisation (ownership) control and
management of the economy.
5. Assist in achieving greater linkages and integrations in agriculture,
industry and commerce.
In-text Questions 1
2.2. Nature and Structure of Financial System
1. What is a financial system?
Financial system comprises several financial institutions, instruments and
operators. An efficient and highly developed financial system is essential to a
healthy economy. An individual personal savings in a bank can be loaned to
another individual to buy a house or to a business firm to build a plant. Large
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scale production and a high degree of specialisation of labour can only function,
if an efficient and robust financial system exists for payment for goods and
services, whether they are needed in production or are offered for sale. Business
organisations can obtain the money or capital they require to buy capital goods
(machinery and equipment), provided the necessary institutions, instruments
and procedures are put in place for making savings available for such
investments.
In Nigeria, several financial institutions, instruments and operators constitutes
its financial system. They include the Central Bank of Nigeria (CBN), Federal
Ministry of Finance (FMF) and Securities and Exchange Commission (SEC)
which are the major players and regulatory bodies. Others are commercial banks
(e.g. First Bank of Nigeria Plc, Guaranty Trust Bank), development banks (e.g.
Federal Mortgage Bank of Nigeria, Bank of Industry, and Bank of Agriculture)
and specialised banks (e.g. Micro Finance Banks). Other financial institutions
and funds are; National Economic Reconstruction Fund (NERFUND), Finance
Houses, Insurance Companies, Bureau De Change (BDC) and Nigeria Deposit
Insurance Corporation (NDIC). Thus, in terms of number and variety, the
Nigeria financial system is quite robust. The institutions above will be discussed
in the subsequent study sessions.
In-text Questions 2
3.0 Conclusion/Summary
1. What constitute Nigerian financial system?
In this study session, we have discussed the nature of financial systems;
explained its structure as well as the various institutions within the system.
4.0 Self-Assessment Questions

1. Financial system entails no more than recycling of funds from surplus to
deficit and to surplus economic sectors. Discuss.
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2. Modern financial system is replete with ambiguous arrangements and
somewhat hanky pinky dealings. Express your opinion on this and
support with scholarly literature.
3. Discuss the role that financial innovations play in the modern financial
system.
4. Write exhaustively on the term, “Financial System”.
5. Describe the evolution of the Modern Financial System.
6.0 Additional Activities (Videos, Animations & out of Class activities)

a. Visit U-tube add https://goo.gl/N2ftN7 Watch the video & summarise in 1
paragraph
b. View the animation on add/site https://goo.gl/quj5Ur and critique it in the

discussion forum
Answer 1
7.0 References/Further
1. Financial system refers toReadings
a set of rules and regulations and the aggregation of
financial arrangements, institutions agents that interact with each other and the rest of the
1. Adekanye,
world F (1986).
to foster economic growth Practice of Banking,
and development Volume 1. Lagos: F & A
of a nation
Answer 2
Publishers Ltd.
1. Financial institutions, instruments and operators.
2. Bodie, Z., Kane, A & Marcus A. J (1998). Essentials of Investment (3 rd
Edition). New York: McGraw Hill Irwin Peter, S. R & Sylvia, C. (2008).
Bank Management & Financial Services (7th International Edition). New
York: McGraw-Hill.
3. Ekezie, E.S (2002). The Elements of Banking (2 nd Edition). Onitsha:
Africana-FEP Publishers Ltd.
2
4. Frazer, L.M. and Ormiston, A. (2009) Understanding Financial
Statements (8th Edition). New Delhi, India: PHI Learning Private Limited
ISBN-978-81-203-3022-1.
5. Khan, M. Y (2008). Financial Services (4th Edition). New-Delhi: Tata
McGraw-Hill Publishing Company limited
6. Pandey, I.M. (2010) Financial Management (10th Edition). New Delhi:
Vikas Publishing House, India.
7. Ross, S.A., Westerfield, R.W. and Jordan, B.D. (2008) Fundamentals of
Corporate Finance (8th Edition). New York: McGraw Hill Irwin. ISBN
978-0-07-353062-8.
8. Van Horne, J.C (2006). Financial Management and Policy (12th Edition).
London: Prentice Hall International, Inc.
2
STUDY SESSION 2
Financial Institutions I
Introduction
2,0 Main Content
2.1 - Financial System
2.2- Nature and Structure of Financial System
4.0 Study Session Summary and Conclusion
Introduction:
You are welcome to study session two. In this session, you will understand the
banking institutions and the different types of banking institutions.

1. Explain what banking institutions are.
2. Discuss the different types of banking institutions.
2.0 Main Content

2.1. Banking Institutions
A bank is simply an institution which accepts deposits from the public and in
turn advances loans by creating credit.
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2.2. Different Types of Banking Institutions
The law also establishes different types of banking institutions. The type of a
banking institution depends on the law establishing it and its functions.
1. Central Bank
A central bank is very different in both its organisation and functions compared
to other types of banking institutions. Since it is said to be at the apex of any
banking system, the law or charter that establishes a central bank is normally
very different from those other laws or legislation establishing other types of
banks.
A central bank is a government owned bank and each country owns only one
central bank. A central bank is therefore the government's representative in the
banking system and acts mainly as banker to the governments. It has a very
close association with both the government and the banking sector of an
economy, advising the government on monetary policies and implementing the
policies on behalf of the government. A central bank is a bank that a
government sets up to help handle its transactions; to co-ordinate and
control the commercial banks, most especially; and, most importantly to
help control the nation's money supply and credit conditions. All the
advanced, free-market economies must have, in addition to commercial and
other types of banking institutions, a central bank that is responsible for the
control of money supply and that must exert a very strong influence over major
financial markets. A central bank as mentioned previously, is an instrument of
the government whether it is in fact publicly owned or not.
For instance, the oldest central bank in the world is the bank of England
established in 1694 as the first joint-stock bank. At this time, the bank was in
competition with the goldsmiths' banking business and other joint-stock banks
which were subsequently formed and made rapid progress, all issuing their own
Bank-notes. However, the bank was nationalised by the Bank of England Act,
1946, the existing stockholders being compensated by the receipt of government
2
stock. That Act included the clearest possible indication that the government
was to make itself henceforth solely responsible for the implementation of the
country's monetary policy. Just as the Bank of England, other nations' central
banks are solely and wholly owned by the central governments of those nations.
Examples abound: In Nigeria, the Central Bank of Nigeria established on the 1st
July 1959, has all its capital subscribed and held only by the federal
Government of Nigeria; in India, the Reserve Bank of India is owned by the
central government. Others include, the Federal Reserve System of America;
the Bank of France in France, the Riks bank Sweden, etc.
A true central bank performs four essential roles, though in some countries, but
not all, it has other roles; for instance in the United Kingdom and Nigeria, the
central banks are also responsible for managing the national debt and exercising
prudential supervision over the banking system. The four essential roles are:
 To issue the national currency;
 To conduct monetary policy;
 To act as lender-of-last-Resort; and
 To manage the exchange rate.
2. Commercial Banks
Commercial banks are the nation's most important financial institutions.
They have the following characteristics:-
 Commercial banks hold the nation's money supply;
 They are the only financial intermediaries whose demand deposits
circulate as money;
 Commercial banks' lending activities create additional bank deposits
through redeposit of the money by the borrower, unless the public choose
to hold more currency;
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 They have the sole power to create money through the monetization of
debt or through a promise to pay, I.O.U; and also, the power to destroy
money.
In-text Questions 1
1. What is a bank?
A commercial bank is a bank whose business includes the acceptance of deposits

withdraw able by cheques’. Commercial banking is strictly retail banking dealing
with personal customers and sometimes, corporate customers. Commercial banks
by right, should concentrate on short term lending and borrowing. But we
discover that commercial bank now operates in a competitive environment and
competition is increasing. Commercial banks compete with each other as well as
with other banking institutions. Commercial banks, therefore, are subject to
competition in their endeavour to attract funds as well as in the area of lending and
investing those funds.
Commercial banks are owned by shareholders who elect the members of the board
of directors to oversee the affairs of the bank. The directors in turn appoint
appropriate management team to manage the bank on their behalf.
Since they are owned by shareholders who have invested their hard-earned money
into the business, the main objective of any commercial bank is therefore profit
maximisation as to retain the confidence reposed on the elected directors cum
appointed management team by the shareholders who expect a return
commensurate to the risk exposure.
3. Development Banks
Development banks are established to provide medium and long-term finance to
the industrial and agricultural sectors of the economy. The development banks
operating in the country are Federal Mortgage Bank of Nigeria (FMBN), Bank of
Industry (BOI) and Bank of Agriculture (BOA) etc.
4. Specialised Banks
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Specialized banks are established to cater for the financial needs of some
segments of the society. Examples of these banks include the Micro Finance
Banks (MFBs) etc.
In-text Questions 2
1. What are the different types of banks?
In this study session, you have been made to understand what banking
institutions are as well as the different types of banking institutions.

1. Is modern financial system indispensable in financial intermediation?
Discuss
2. Compare and contrast conventional financial system with Islamic
financial system.
3. Write exhaustively on the origin of banks.
4. What are financial institutions? Write exhaustively on this.
5. What are Non-Bank financial institutions? How do they differ from
banks?
6. Describe and write extensively on the following non-bank institutions:
(a)Finance Houses
(b) Discount Houses
(c) Stock Broking and Brokers
(d)Investment Companies
(e)Insurance Companies
(f)Pension Funds and Mutual Funds
7. Finance companies and Discount houses are one and the same. Explain
your understanding.
2
a. Visit U-tube add https://goo.gl/gxsbXH Watch the video & summarise in 1
paragraph
b. View the animation on add/site https://goo.gl/24H996 and critique it in the

discussion forum
Answer 1
7.0
1. AReferences/Further Readings
bank is simply an institution which accepts deposits from the public and in turn
advances loans by creating credit.
1. Adekanye,
Answer 2 F (1984).The Element of Banking in Nigeria (2nd Edition).
1. Central bank, Commercial
Bedfordshire: Graham banks,
Bum.Development banks and Specialised banks.
2. Adekanye, F (1986). Practice of Banking, Volume 1. Lagos: F & A

Publishers Ltd.
York: McGraw-Hill.
ISBN-978-81-203-3022-1.
2
978-0-07-353062-8.
10.Weston, J. Fred & Brigham, F. Eugene (2002). Managerial Finance (7th
Edition). The Dryden Press.
2
STUDY SESSION 3
Financial Institutions II
Introduction
2,0 Main Content
2.1 - Non-Banking Institutions
2.2- Different Types of Non-Banking Institutions
2.3- Foreign Exchange Market
3.0Study Session Summary and Conclusion
4.0Self-Assessment Questions
6.0Additional Activities (Videos, Animations & Out of Class activities)
Introduction:
In this study session, you will understand what non-
banking Institutions are and the different types of non-
banking institutions.

1. Describe non-banking Institutions
2. Explain the different types of non-banking institutions.
2.0 Main Content

2.1. Non-Banking Institutions
Non-banking institutions are those institutions that act as indirect channels
between ultimate lenders and ultimate borrowers. They pool funds from net
2
savers and lend them to finance expenditures of business firms and local bodies.
To obtain these funds, they issue and sell indirect securities such as insurance
policies, savings and loan shares, time deposits, and common fund stocks. They
purchase primary securities; such as government securities, mortgages, common
and preferred stocks, and consumer and other short-term debts, in order to lend
funds to ultimate borrowers.
Thus from the above, Non-banking institutions are financial firms that buy one
kind of financial asset and sell another. For example, savings and loans
associations and mutual savings banks operate mainly by buying mortgages and
In-text Questions 1
Selling savings deposits, while insurance companies buy mainly bonds and sell
1. What is known as non-bank?
insurance policies; and then, finance companies operate by buying instalment
credit facilities and selling commercial papers.
2.2. Different Types of Non-Banking Institutions

Non-banking institutions include the followings:
1. Finance Houses
2. Discount Houses
3. Investment Companies
4. Pension Funds
5. Nigeria Deposit Insurance Corporation (NDIC)
6. Insurance Companies
7. National Economic Reconstruction Fund (NERFUND)
8. Bureau De Change (BDC)
9. Stock Broking Firms
3
2.3. Foreign Exchange Market
Different countries have different currencies. The foreign exchange market
(forex) is the market where the currency of one country is converted for the
currency of another country.
Determinants of Foreign Exchange Rates
• Inflation Rates
• Interest Rates
• Balance of Payment Surpluses and Deficits
• International Reserves
Interbank Market
Interbank market is the wholesale market in which major banks trade with each
other. Most currency transactions are channel through the worldwide interbank
market
In-text Questions 2
1. Mention some of the non-banks financial institutions.
In this study session, we have explained what non-banking Institutions are,
the different types of non-banking institutions as well as the discussion on
foreign exchange market.

1. How is capital accessed in the capital market?
2. What are financial markets? Write exhaustively on this.
Write extensively on the following types of financial markets:
3. Money market
4. Capital market
5. Foreign exchange Market
3
6. Interbank Market
7. What functions do financial markets play in an economy?
8. Identify the key players involved in the financial market
9. Identify and extensively explain 10 terminologies used in the capital
market.
10. How are financial markets classified? Write extensively on this.

a. Visit U-tube add https://goo.gl/gxsbXH Watch the video & summarise in 1
paragraph
b. View the animation on add/site https://goo.gl/24H996and critique it in the

discussion forum
Answer 1
1. Non-banking institutions are financial firms that buy one kind of financial asset and sell another.
Answers 2
1. Finance houses, discount houses, investment companies, pension funds, insurance companies, Nigeria deposit insur

1. Adekanye, F (1984).The Element of Banking in Nigeria (2nd Edition).
Bedfordshire: Graham Bum.
Publishers Ltd.
York: McGraw-Hill.
3
ISBN-978-81-203-3022-1.
978-0-07-353062-8.
3
STUDY SESSION 4
Financial Markets & Stock Exchange
Introduction
2,0 Main Content
2.1 - Financial Markets
2.2- Types of Financial Market
2.3- Stock Exchange
2.4- Functions of Nigeria Stock Exchange
Introduction
In this study session, you will be able to understand
financial markets as well as the money and capital
markets. Also, stock exchange market will be
discussed.

1. Define the financial markets.
2. Explain the money and capital markets.
3. Discuss the stock exchange market.
3
2.0 Main Content
2.1. Financial Markets
Financial market is an institutional arrangement which facilitates the exchange
of financial assets such as deposits and loans, stocks and bonds, government
securities, bills, etc. Financial markets operate through brokers, banks, non-
banking financial institutions, merchant banks, mutual funds, discount houses,
central bank, etc. There are two major markets, Money and Capital markets.
While money market provides facilities for the trading of short-term
instruments, capital market is for the trading of long-term instruments. All the
markets provide avenue for the transfer of funds from surplus to deficit units.
In-text Questions 1
2.2. Types of Financial Market
1. Define a financial market.
(i) Money Market
The money market is a market for short-term instruments that are close
substitutes for money. The short-term instruments are highly liquid, easily
marketable, with little chance of loss. It provides for the quick and dependable
transfer of short-term debt instruments maturing in one year or less, which are
used to finance the needs of consumers, businesses and government.
Among the instruments of money market are treasury bills and certificates, call
money and other short term instruments with a maturity period of less than one
year. These instruments facilitate the intermediation of funds from surplus to
deficit units in the economy.
Thus, the money market provides opportunity for those with surplus funds
for their immediate needs to lend at short-term, thereby meeting the
demand of borrowers who are in need of temporary finance and can offer
3
an acceptable claim. In Nigeria, the debt instruments traded in this market
include treasury bills, treasury certificates, commercial papers, bankers’
acceptances, promissory notes, certificates of deposit and call money.
Participants in the market include; the commercial banks-the most dominant of

the financial institutions in the intermediation of short term funds, wholesale
banks, insurance companies, savings banks etc.
In-text Questions 2
(ii) Capital Market
1. What is a money market?
The capital market is a market which deals in long-term loans. It supplies industry
with fixed and working capital and finances medium-term and long-term
borrowings of the central, state and local governments. The capital market deals
in ordinary stock, shares and debentures of corporations, and bonds and
securities of governments. The funds that flow into the capital markets come
from individuals who have savings to invest, the merchant banks, the commercial
banks and non-banking financial intermediaries, such as insurance companies,
finance houses, unit trusts, investment trusts, venture capital, leasing finance,
mutual funds, building societies etc.
The capital market functions through the stock exchange market. The stock
exchange market is a market which facilitates buying and selling of shares, stocks,
bonds, securities and debentures. It is a market for both old and new instruments.
In-text Questions 3
1. Define capital markets.
2.3. Stock Exchange

Stock exchange market is a market where shares and other securities are bought
and sold. It is a specialised market for the purchase and sale of existing shares
and securities.
3
The Nigerian Stock Exchange
The Nigerian Stock Exchange (NSE) is one of the constituencies of the Nigerian
Capital Market. It is a private and non-profit making organisation limited by
guarantee. It was incorporated via the inspiration and support of businessmen and
the Federal Government of Nigeria. It is owned by about 300 members and the
membership includes financial institutions, stock brokers and individual Nigerians
of high integrity who have contributed to the development of the stock exchange
market and Nigerian economy. The NSE started with the incorporation of the then
Lagos stock exchange in 1961. Trading commenced on the exchange in 1961 after
the enactment of the Lagos stock exchange act of 1961. The self-regulatory
organisation was subsequently reorganised and renamed “the Nigeria Stock
Exchange (NSE)” in 1976 based on the report and recommendations of the Pius
Okigbo Financial System Review Committee.
The NSE is thus an institution of the Nigerian capital market, which provides
trading floors where all dealing members operate on every business day. The
NSE now has nine (9) branches and all the branches function principally as
trading floors.
2.4. Functions of Nigeria Stock Exchange

Some of the functions of the NSE include (Al-Faki, 2007):
(a) To provide opportunities for raising new capital.
(b) To promote increasing participation by the public in the private sector of
the economy.
(c) To provide appropriate machinery to facilitate further offerings of stocks
and shares to the public.
(d) To provide a central meeting place for members to buy and sell existing
stocks and shares and for granting quotation to new ones.
3
(e) To reduce the risk of liquidity by facilitating the purchasing and sale of
securities.
In this study session, we have discussed the definition of the financial markets;
explain the money and capital markets as well as the stock exchange market.

1. What is Stock Exchange? Write exhaustively on the term. Also, write on
the history of the stock exchange.
2. What roles do stock exchanges play in an economy?
3. How do stock exchanges operate?
4. Write extensively on the following:
(a)Bull/ Charging Bull/Bull Market
(b)Bear Market
(c)Stag Market
(d)Jobbers
(e)Stock brokers
5. Give a detailed write up on the Nigerian Stock Exchange.
6. Identify the basic legislations that guide transactions in the stock

market.

a. Visit U-tube add https://goo.gl/V4BpEv Watch the video & summarise in 1
paragraph
b. View the animation on add/site https://goo.gl/JAc15G and critique it in the
3
discussion forum
Answer 1
7.0
1. AReferences/Further Readings
financial market is a market in which people trade financial securities, commodities
and other tangible items of value at low transaction cost and at prices that reflect supply
and demand. Securities include stocks and bonds, and commodities include precious
metalsBedfordshire:
or agricultural Graham
products. Bum.
Answer 2
2. Adekanye,
1. Money market is aFsegment
(1986).of Practice of Banking,
financial market in which Volume 1. Lagos: with
financial instruments F & A
highly Publishers
liquid and very
Ltd.short maturities are traded. The instruments traded in this market
are treasury bills, treasury certificates, commercial papers, bankers’ acceptance,
3. Bodie,
promissory Z., certificate
notes, Kane, A of&deposit
Marcus andA. (1998). Essentials of Investment (3 rd
callJ money.
Answer 3
Edition).
1. Capital marketsNew York: McGraw
are financial Hill
markets for Irwinand
buying Peter,
sellingS.ofRlong
& Sylvia, C.or(2008).
term debt equity
backedBank
securities. These markets
Management channel theServices
& Financial wealth of(7savers
th to those whoEdition).
International can put it New
to
long term productive use, such as, companies of governments making long term
York:The
investment. McGraw-Hill.
instruments traded are stocks, shares, debentures and bonds.
ISBN-978-81-203-3022-1.
3

978-0-07-353062-8.

4
2.0 MODULE 2
Financial Instruments
Contents:
STUDY SESSION 1
Financial Instruments I
Introduction
2,0 Main Content
2.1- Bond
Introduction:
In this study session, you will be able to understand Bond instrument as well as
the different types of bonds.

1. Define the Bond.
2. Explain the different types of bonds.
4
2.0 Main Content
2.1. Bond
Bonds are debt obligations with long-term maturities issued by governments
and large corporations. They are securities that pay a stated amount of
interest to the investor, period after period, until it is finally retired by the
issuer. Bond valuation is can be compared to the valuation of capital budgeting
project, businesses and/or real estate.
A bond has some basic features, namely: a face value, maturity period, fixed
interest known as coupon payment and a redemption value. An important thing
to note about a bond is that, its value depends largely on the prevailing rate of
interest in the economy. Bonds and interest rates have an inverse relationship; a
rise in interest rate will force the value of the bond to decline, while a reduction
in interest rate has the consequence of making the value of the bond to rise.
To demonstrate the reason behind the inverse relationship, you will need to
understand the concept of yield. Bond yield is simply the amount of return that
an investor will realise on a bond. It is important to remember that a bond yield
to maturity is inverse to its price. As the bond's price increases, its yield to
maturity falls.
For example, if you purchased a bond with a par (face) value of N100, and a 10
percent annual coupon rate, its yield would be the coupon rate divided by the
par value (10/100 = 0.10), or 10 percent. If the bond price falls to N90, the yield
would become (10/90 = 0.11) or 11 percent. The bond holder would still receive
the same amount of interest, because the coupon rate is based on the bond’s par
value. As you can see, the yield increased because the bond's price fell.
In-text Questions 1
1. What is a bond?
4
Types of Bonds
a) Secured/Unsecured Bond: A secured bond is when the bond is secured
on the real asset of the issuer. Unsecured bond on the other hand is when
the bond is issued mainly on the name and fame of the issuer without any
backing for the fall back option of the investor.
b) Perpetual/Redeemable Bonds: Bonds that do not or never mature at all
are called perpetual bonds. The only advantage to the investor is that
perpetual bonds carry high interest rate which makes them attractive to
investors. Redeemable bonds on the other hand are bonds that are
expected to be repaid (redeemed) after a specified period of time. They
are the opposite of perpetual bonds.
c) Fixed Interest Bonds/Floating Interest Bonds: Fixed interest bonds do
carry fixed interest on their face value and investors must be paid the
fixed interest on the bonds regardless of the financial standing of the
issuer. Floating interest bonds on the other hand are bonds issued with the
understanding that interest will not be fixed, and can be up or down
depending on the financial disposition of the issuer or the prevailing
interest rate in the economy.
d) Zero Coupon Bonds: These bonds do not carry or bear interest but are
sold at a discount initially and at maturity, the investor is paid the full
face value of the bond.
In-text Questions 2
1. Mention the types of bonds.
In this study session, we have discussed the definition the Bond and explained
the different types of bonds.
4
1. What are financial instruments? Identify the types that exist and how they
differ.
2. What is a bond? Write extensively on this term. Also write extensively on
Bond markets.
3. Identify and give an extensive description on the types of bonds that exist.
4. Bonds have been said to have certain characteristics. What are they?
5. What is a treasury bill? Write exhaustively on this. Also, what are Nigerian
treasury bills?
6. Why do governments issue treasury bills?
7. Write extensively on what Commercial papers are. Write on the history of
commercial papers also.
8. Identify the advantages and disadvantages of commercial papers.
9. Write extensively on the types of commercial papers that exist.
10. Describe the term, Banker’s Acceptance. Write on its history and identify
the benefits associated with its use.
11. Distinguish between certificates of deposit, commercial papers and bankers
acceptances.

a. Visit U-tube add https://goo.gl/SRDQ9q Watch the video & summarise in 1
paragraph
B. View the animation on add/site https://goo.gl/UdpMwN and critique it in the

discussion forum
Answer 1
1. Bonds are debt obligations with long-term maturities issued by governments and large
corporations.
Answer 2
1 (a) secured/unsecured bonds (b) Perpetual/ Redeemable bond (c) Fixed interest rate/
Floating bond (d) Zero coupon bond.
4

Publishers Ltd.

York: McGraw-Hill.


ISBN-978-81-203-3022-1.



978-0-07-353062-8.

4
SESSION 2
Financial Instruments II
Introduction
2,0 Main Content
2.1 - Treasury Bills (TBs)
2.2- Commercial Papers (CPs)
2.3- Bankers’ Acceptances (BAs)
Introduction:
In this study session, you will be able to understand the other types of financial
instruments such as Treasury Bills, Call Money and Commercial Papers etc.

1. Explain the Treasury Bills.
2. Discuss the other type’s financial instruments.
2.0 Main Content

2.1. Treasury Bills (TBs)
Treasury bills are instruments for short-term borrowing for the
government treasury. The instruments have a maturity of 91 days and are
usually sold at discount. Government uses TBs to raise fund to cover temporary
excesses of the state expenditure over income. TBs are also used as
4
instruments of monetary policy by the central bank to mop up excess
liquidity in the system. The major buyers of the TBs are commercial banks and
the central bank.
2.2. Commercial Papers (CPs)

Commercial papers consist of promissory notes of large firms that are sold
primarily to other business firms, insurance companies, banks, pension funds
and government to mobilise funds in the short-term usually not more than three
months. CPs often provides funds at lower rates to the firm than do the other
instruments. In Nigeria, reputable business firms wishing to raise funds through
issuing houses, which are generally banks, mostly issue CPs.
2.3. Bankers’ Acceptances (BAs)

Bankers’ acceptances are created when commercial papers issued by business
firms have been endorsed and guaranteed by the issuing bank, the investor is
assured of the return of his money on schedule by the bank, irrespective of
whether the issuer pays. BAs usually have tenure of ninety (90) days with
interest normally paid up-front.
In-text Questions 1
Other Financial Instruments include
1. What is the difference between a treasury bill and a commercial paper?
 Treasury Certificates (TCs)
 Call Money (CM)
 Eligible Development Loan Stock (EDLS)
 Bankers’ Unit Funds (BUFs)
 Certificate of Deposits (CDs)
 CBN Certificates
4
In-text Questions 2
1. Mention some of the financial instruments that you know.
In this study session, we have explained the Treasury Bills as well as the
other types of financial instruments.

1. What are Financial Statements? Identify and describe the purpose of
financial statements?
2. Identify and describe four different types of financial statements.
3. i. What are consolidated financial statements?
ii. How do government financial statements differ from personal financial
statements?
4. i. Write extensively on the structure of a bank’s balance sheet.
ii. What purpose does the balance sheet serve in a business entity?
5. i. Describe the Profit and Loss Account of a bank.
ii. What purpose does the profit and loss account serve in a business entity?
6. i. Describe the statement of Cash flows of a bank.
ii. What purpose does the statement of cash flows play in a business entity?
7. A lean structure of stock exchange guarantees its efficiency. Analyse the
statement with reference to the structure of a stock exchange of your
choice and suggest improvements that will enhance its operational
efficiency if any.
.

a. Visit U-tube add https://goo.gl/SRDQ9q Watch the video & summarise in 1
paragraph
4
b. View the animation on add/site https://goo.gl/UdpMwN and critique it in the
discussion forum
Answer 1
1. Treasury Readings
bills are instruments for short-term borrowing for the government treasury.
which have a maturity of 91 days and are usually sold at discount. While Commercial
1. Adekanye,
papers F (1984).The
consist of promissory notes ofElement ofthat
large firms Banking
are sold in Nigeria
primarily (2nd Edition).
to other business
firms, insurance companies,
Bedfordshire: Grahambanks, pension funds and government to mobilise funds in the
Bum.
short- term usually not more than three months.
2. Adekanye,
Answer 2 F (1986). Practice of Banking, Volume 1. Lagos: F & A
1. Treasury bills commercial papers, banker’s acceptance.
Publishers Ltd.
York: McGraw-Hill.
ISBN-978-81-203-3022-1.
4
978-0-07-353062-8.
5
STUDY SESSION 3
Nigerian Capital Market
Introduction
2,0 Main Content
2.1- The Nigerian Capital Market
Introduction:
You are welcome to this study session. In this
session, you will understand the Nigerian
Capital Market as well as its functions.

1. Explain the Nigerian Capital Market.
2. Discuss the functions of the Nigerian Capital Market.
2.0 Main Content

2.1. The Nigerian Capital Market
Capital market is a cornerstone of every financial system since it provides the

funds needed for financing not only business and other economic institutions,
but also the program of government as a whole. The market is essentially for
long term securities such as stocks, debentures, and bonds et cetera which
5
usually last longer than 3 years. Prior to the birth of the Nigerian capital
market, almost all formal savings and deposits were controlled by the banking
system. The country’s substantial resources were invested in London Stock
Exchange through London-based stockbrokers. The Nigerian Stock Market
effectively came into being in 1960 with the establishment of the Lagos Stock
Exchange. It became the Nigerian Stock Exchange (NSE) in 1977 with branches
in different parts of the country. Initially, the market comprises the Nigerian
Stock Exchange with six branches, a number of stockbrokerage firms and the
Securities and Exchange Commission (SEC).
In-text Questions 1
Since then, the market has expanded both in number of braches as well in its
1. What is a capital market?
operational efficiency. As at 2008, the Nigerian Stock Exchange had thirteen
(13) branches spread across the country, apart from its world class trading floor
in Lagos. The Nigerian stock exchange thus provides the essential facilities
for companies and governments, to raise money for business expansion and
development projects for the ultimate economic benefit of the society. In
other words, it is a self-regulatory organisation that provides the framework and
facilities for the trading of securities in the secondary market.
Investment analysts are of the opinion that,the growth of the Nigerian stock
market was influenced by government patronage and reform policies. In 1970s,
government raised funds from the market by floating development stocks. It
also enacted legislations which required both the Pension and Provident Funds,
to invest a substantial proportion of their funds in government stock. The
implementation of the Nigerian Enterprises Promotion Decree significantly
streamlined the growth of the Nigerian capital market, by making more equities
available.
5
The Exchange provides a means for trading existing securities. It encourages
large-scale enterprises to gain access to public listing. In 1984, the Stock Market
took the initiative of introducing the Second-tier Securities Market (SSM)
which encourage small/medium-scale industries to seek quotation on the Stock
Exchange by stipulating less stringent listing requirements.
The Nigerian capital market was established for the following reasons:
i. To overcome difficulties of selling government stock.
ii. To provide local opportunities and lending for long term purpose.
iii. To enable authorities mobilise long term capital for economic growth and
development.
iv. To enable the foreign business the chance of offering their shares to
interested Nigerians to invest and participate in the ownership of foreign
businesses.
2.2. Functions of the Nigerian Capital Market

The role of capital in the production process and economic performance of a
nation has long been recognised. Capital provides the impetus for the effective
and efficient combination of factors of production to ensure sustainable
economic growth. Moreover, the effective utilisation of productive resources
accumulated overtime would determine the pace of growth of an economy. The
Nigerian capital market which is a major segment of financial markets
provides a setting for medium utilisation. The functions of Nigerian capital
market include the following:
i. The promotion of rapid capital
ii. It is a machinery for mobilising long term financial resources for
industrial development
iii. The provision of an alternative source of fund other than taxation for
government
5
iv. The mobilisation of savings from numerous economic unit for growth and
development
v. The provision of liquidity for any investor or growth of investors.
vi. The broadening of the ownership base of assets and the creation of a
healthy private sector.
vii. It is an avenue for effecting payment of debt.
viii. The encouragement of a more efficient allocation of new investment
through the pricing mechanism.
ix. The creation of a built in operational and allocation efficiency within the
financial system to ensure that resources are optimally utilised at
relatively little cost.
x. It is a necessary liquidity mechanism for investors through a formal market
for debt and equity securities.
In-text Questions 2
Analysts and commentators have raised questions with regard to the extent to
1. What is the role of capital in the production process and economic performance of a
which
nation?Nigerian capital market is performing its function. Studies have not been
able to convincingly determine the efficiency or inefficiency of the market.
In this study session, we have explained the Nigerian Capital Market as well
as the functions of the Nigerian Capital Market.

1. Define Bank Assets and identify the different types of bank assets.
2. Define bank liability and the types of bank liability.
3. What is credit policy? Why is credit policy needed?
5
4. i. Identify the necessary considerations when developing a credit policy?
ii. Identify the contents of a credit policy document.
5. Identify the types of credit policies that exist.
6. i. What is a loan portfolio?
ii. Identify the types of risks associated with lending.
7. Loan portfolio objectives establish specific, measurable goals for the
portfolio. Loans should be made with certain objectives in mind. What
are these objectives?
8. Write extensively on portfolio segmentation and risk diversification.
9. Write extensively on Credit management information systems.
10. Discuss the items that constitute bank assets and show why asset
management is essential in managing a bank.

a. Visit U-tube add https://goo.gl/qUtJE1 Watch the video & summarise in 1
paragraph
b. View the animation on add/site https://goo.gl/Zt8iYu and critique it in the

discussion forum
Answer 1
1. Capital Readings
market is a cornerstone of every financial system since it provides the funds
needed for financing not only business and other economic institutions, butndalso the
1. Adekanye,
program of government F (1984).The
as a whole. Element of Banking in Nigeria (2 Edition).
Answer 2Bedfordshire: Graham Bum.
1. Capital provides the impetus for the effective and efficient combination of factors of
2. Adekanye,
production F (1986). Practice
to ensure sustainable economicof Banking, Volume 1. Lagos: F & A
growth
Publishers Ltd.
5
Edition). New York: McGraw Hill Irwin Peter, S. R & Sylvia, C.
(2008). Bank Management & Financial Services (7th International
Edition). New York: McGraw-Hill.
Statements (8th Edition). New Delhi, India: PHI Learning Private
Limited ISBN-978-81-203-3022-1.
6. Khan, M. Y (2008). Financial Services (4 th Edition). New-Delhi: Tata
8. Ross, S.A., Westerfield, R.W. and Jordan, B.D. (2008) Fundamentals
of Corporate Finance (8th Edition). New York: McGraw Hill Irwin.
ISBN 978-0-07-353062-8.
9. Van Horne, J.C (2006). Financial Management and Policy (12th
Edition). London: Prentice Hall International, Inc.
10.Weston, J. Fred & Brigham, F. Eugene (2002). Managerial Finance (7 th
5
STUDY SESSION 4
Interest Rate Theories
Introduction
2,0 Main Content
2.1 - Interest
2.2- Different Types of Interest
Introduction:
You are welcome to this study session. In this study
session you will get to understand the concept of
interest, different types of interest as well as the rate
of interest.

1. Understand the concept of interest.
2. Explain the different types of interest as well as the rate of interest.
2.0 Main Content

2.1. Interest
Interest is the price paid for obtaining money or price received for providing
money or goods in a credit transaction which is calculated as a fraction of the
amount or value of what was borrowed.
5
2.2. Different Types of Interest
Simple Interest: This is defined as an amount of money paid (or earned) for the
use of money borrowed (or lent) on the principal sum.
Compound Interest: This is defined as amount earned (or paid) on any previous
interest earned, as well as on the principal lent (or borrowed). Compound
interest generally implies that interest earned on a loan is periodically added to
the principal; and interest is earned on the previous interest as well as on the
original principal.
In-text Questions 1
2.3. Interest Rates
1. What is interest rate?
Interest rate is a value charged by lenders as compensation for the loss of the
asset’s use. But in the case of money lent, it is a value gained by the lender of
such money to others as against what he ought to have earned himself if he were
to invest the funds instead of lending them out. In other words the allocation of
funds in an economy happens primarily on the basis of price, expressed in terms
of expected return.
It is compensation that a supplier of funds expects and a user of funds must pay
in return. Interest rates are normally applied to debt instruments such as bonds
and bank loan facilities.
In-text Questions 2
1. What is the difference between simple interest rate and compound interest rate?
In this study session, we have discussed the concept of interest, different types
of interest as well as the rate of interest.
5
1. i. What is Interest?
ii. What is Interest rate?
iii. What are the types of Interest rate?
Write on these theories of Interest?
2. The Abstinence or Waiting Theory of Interest.
3. The Agio Theory and Time Preference Theory.
4. The Marginal Productivity Theory.
5. Saving and Investment Theory (The Classical Theory)
6. Loan able Funds Theory
7. Liquidity Preference Theory
8. i. What are Bank regulations?
ii. Identify the objectives of bank regulation.
9. Write on the general principles of bank regulation throughout the world.
10. What are the instruments and requirements of bank regulation?.

a. Visit U-tube add https://goo.gl/K52iDi Watch the video & summarise in 1
paragraph
b. View the animation on add/site https://goo.gl/BVgi35 and critique it in the

discussion forum
Answer 1
1. Interest is the price paid for obtaining money or price received for providing money or
goods in a credit transaction which is calculated as a fraction of the amount or value of
what was borrowed. Interest rate is a value charged by lenders as compensation for the
loss of the asset’s use.
Answer 2
1. Simple interest rate is defined as an amount of money paid (or earned) for the use of
money borrowed (or lent) on the principal sum while compound interest rate is defined as
amount earned (or paid) on any previous interest earned, as well as on the principal lent
(or borrowed
5
Publishers Ltd.
York: McGraw-Hill.
ISBN-978-81-203-3022-1.
978-0-07-353062-8.
6
3.0 MODULE 3
Bank Management
Contents:
STUDY SESSION 1
Structure of Bank Financial Statements
Introduction
2,0 Main Content
2.1 - Financial Statement
2.2- Uses of Financial Statements
2.3- Balance Sheet of a Commercial Bank
2.4- Structure of Balance Sheet of a Commercial Bank
Introduction:
You are welcome to another study session. In this study session you will
understand the Bank Financial Statements as well as Structure of Balance Sheet
of a Commercial Bank.
6
1. Discuss the Bank Financial Statements.
2. Explain the Structure of Balance Sheet of a Commercial Bank
2.0 Main Content

2.1. Financial Statement
Financial statements are records that outline the financial activities of
companies, organisations and/or any other body. They usually present financial
information of those bodies in a clear and concise manner for their internal uses
and for the regulatory authorities and/or the general public. For the purpose of
business entities, financial statements normally include: balance sheet, income
statements, cash flows, and statements of retained earnings, among others.
2.2. Uses of Financial Statements

Financial Statements are used in a variety of ways. They are important
documents which provide useful information to a wide range of users as listed
below:
1. Managers require Financial Statements to manage the affairs of the company
by assessing its financial performance and position and taking important
business decisions.
2. Shareholders use Financial Statements to assess the risk and return of their
investment in the company and take investment decisions based on their
analysis.
3. Prospective Investors need Financial Statements to assess the viability of
investing in a company. Investors may predict future dividends based on the
profits disclosed in the Financial Statements. Furthermore, risks associated with
the investment may be gauged from the Financial Statements. For instance,
6
fluctuating profits indicate higher risk. Therefore, Financial Statements provide
a basis for the investment decisions of potential investors.
4. Financial Institutions (e.g. banks) use Financial Statements to decide whether
to grant a loan or credit to a business. Financial institutions assess the financial
health of a business to determine the probability of a bad loan. Any decision to
lend must be supported by a sufficient asset base and liquidity.
5. Suppliers need Financial Statements to assess the credit worthiness of a
business and ascertain whether to supply goods on credit. Suppliers need to
know if they will be repaid. Terms of credit are set according to the assessment
of their customers' financial health.
6. Customers use Financial Statements to assess whether a supplier has the
resources to ensure the steady supply of goods in the future. This is especially
vital where a customer is dependent on a supplier for a specialised component.
7. Employees use Financial Statements for assessing the company's profitability
and its consequence on their future remuneration and job security.
8. Competitors compare their performance with rival companies to learn and
develop strategies to improve their competitiveness. General Public may be
interested in the effects of a company on the economy, environment and the
local community.
9. Governments require Financial Statements to determine the correctness of tax
declared in the tax returns. Government also keeps track of economic progress
through analysis of Financial Statements of businesses from different sectors of
the economy.
In-text Questions 1
1. What is a financial statement?
6
2.3. Balance Sheet of a Commercial Bank
Commercial banks all over the world have what are known as Assets and
Liabilities. These assets and liabilities put in a definite format give us a balance-
sheet. Ability to read and understand the balance-sheet of a bank means
coming up to conclusions as to how the bank is doing, how strong it is
financially, how it is affected by any monetary policy in force at the time of
the balance sheet, and what use it is making of the money it has. A balance
sheet is a ‘photograph of a company's business at a moment in time’.
A balance sheet will show what money the company has obtained from other
sources, such as customers opening accounts with it and depositing money in
them. From the bank's point of view these are all debts, or otherwise referred to
as Liabilities. In other words, the liabilities of a bank tells us where a bank’s
management got the resources or funds which it has put into use. The liabilities
are usually placed on the left-hand side of a bank’s balance sheet.
Commercial banks lent out their money or invested in subsidiary or associated

companies, sometimes invested their money in securities and some portion of
their money are held with the Central Bank. These are usually referred to as
the Assets of the bank which tell us the use to which banks’ management
have put the resources or funds at their disposal to generate revenue for
their shareholders or owners.
In-text Questions 2
1. What is a balance sheet?
So, both the assets and liabilities of a bank tell us the uses and sources of bank’s
funds or resources. Because we are dealing with one total sum of money, but
looking at it from two points of view, we expect to find that the figures on each
side of the balance sheet add up to the same total. For ease of comparison and
6
conclusions, in Nigeria, the Companies and Allied Matters Decree 1990, stipulates
that alongside each year’s figures must be stated the corresponding figure for the
preceding year.
2.4. Structure of Balance Sheet of a Commercial Bank

As already defined, a balance sheet is a statement which shows the assets and
liabilities of a commercial bank on a particular date at the end of one year. The
assets and the liabilities are shown on the balance-sheet. As is the case in every
company, the assets and liabilities of a bank must balance.
In this study session, we have discussed the Bank Financial Statements as well
as Structure of Balance Sheet of a Commercial Bank.

1. Elaborate on the usefulness of financial statement information in bank
management.
2. Proffer some ethical issues to consider while preparing and analyzing
financial statement of a bank.
3. What are financial statements?
4. Discuss the uses of financial statement.

a. Visit U-tube add https://goo.gl/mHfiHa Watch the video & summarise in 1
paragraph
b. View the animation on add/site https://goo.gl/91CbHh and critique it in the

discussion forum
6
Answer 1
1. Financial statements are records that outline the financial activities of companies,
organizations and/or any other body
Answer 2
1. Commercial banks all over the world have what are known as Assets and Liabilities.
These assets and liabilities put in a definite format give us a balance-sheet.
A balance sheet is a ‘photograph of a company's business at a moment in time.

Adekanye, F (1984).The Element of Banking in Nigeria (2nd Edition).
Adekanye, F (1986). Practice of Banking, Volume 1. Lagos: F & A Publishers
Ltd.
Bodie, Z., Kane, A & Marcus A. J (1998). Essentials of Investment (3 rd
(2008). Bank Management & Financial Services (7 th International
Ekezie, E.S (2002). The Elements of Banking (2 nd Edition). Onitsha: Africana-
FEP Publishers Ltd.
Frazer, L.M. and Ormiston, A. (2009) Understanding Financial Statements (8 th
Edition). New Delhi, India: PHI Learning Private Limited ISBN-978- 81-
203-3022-1.
Khan, M. Y (2008). Financial Services (4th Edition). New-Delhi: Tata McGraw-
Hill Publishing Company limited
Pandey, I.M. (2010) Financial Management (10th Edition). New Delhi: Vikas
Publishing House, India.
Ross, S.A., Westerfield, R.W. and Jordan, B.D. (2008) Fundamentals of
978-0-07-353062-8.
Van Horne, J.C (2006). Financial Management and Policy (12th Edition).
6
Weston, J. Fred & Brigham, F. Eugene (2002). Managerial Finance (7th
6
STUDY SESSION 2
Bank Asset and Liability
Introduction
2,0 Main Content
2.1 - Assets and Liabilities of a Commercial Banks
2.2- Breakdown of a Commercial Bank Balance Sheet
Introduction:
You are welcome to another study session. In this session, you will understand
the Bank Asset and Liability.

1. Explain the Bank Assets.
2. Discuss the Bank Liabilities.
2.0 Main Content

2.1. Assets and Liabilities of a Commercial Banks
Deposit Money Banks all over the world have what are known as Assets
and Liabilities. These assets and liabilities put in a definite format give us a
balance-sheet. Ability to read and understand the balance-sheet of a bank means
coming up to conclusions as to how the bank is doing, how strong it is
financially, how it is affected by any monetary policy in force at the time of the
6
balance sheet, and what use it is making of the money it has. A balance sheet is
a ‘photograph of a company's business at a moment in time’
In-text Questions 1
2.2. Breakdown of a Commercial Bank Balance Sheet
1. What do you understand after assessing a balance sheet?
The distribution of assets and liabilities of a typical Nigerian commercial bank
are as follows:
(I) Assets
1. Cash
2. Balances with the CBN and other banks
3. Money at Call
4. Bills Discounted and Purchased
5. Investments
6. Loans, Advances, Cash Credit, and Overdraft (Credit Facilities)
7. Liabilities of Customers for acceptances, Endorsement and other
obligation
8. Fixed Assets
9. Profit and Loss
(II) Liabilities
1. Share Capital
2. Reserved Fund
3. Deposits
4. Borrowings from other banks
5. Bills Payable
6. Bills for Collection
6
7. Acceptances, Endorsements and other obligations
8. Contingents Liabilities
9. Profit and Loss
In-text Questions 2
1. The balance sheet has two sides namely:
In this study session, we have discussed the Bank Assets and Bank
Liabilities.

1. The balance sheet of a bank does not reveal all relevant information on
the standing of a bank. Evaluate this statement.
2. Discuss the relevance or otherwise of assets and liabilities in a bank using
real life illustrations.

a. Visit U-tube add https://goo.gl/PxXgj7 Watch the video & summarise in 1
paragraph
b. View the animation on add/site https://goo.gl/wY5x7p and critique it in the

discussion forum
Answer 1
7.0
1. ItReferences/Further
gives you the ability to Readings
understand how well the bank is doing.
Answer 2
Adekanye, (1984).The Element of Banking in Nigeria (2nd Edition).
1. Asset andFliabilities
7
Ltd.

Edition). New York: McGraw Hill Irwin Peter, S. R & Sylvia, C. (2008). Bank
Management & Financial Services (7th International Edition). New York:
McGraw-Hill.

FEP Publishers Ltd.

Edition). New Delhi, India: PHI Learning Private Limited ISBN-978-81-203-
3022-1.


Corporate Finance (8th Edition). New York: McGraw Hill Irwin. ISBN 978-0-
07-353062-8.
Van Horne, J.C (2006). Financial Management and Policy (12 th Edition).
Weston, J. Fred & Brigham, F. Eugene (2002). Managerial Finance (7 th

7
STUDY SESSION 2
Loan and Credit Policies
Introduction
2,0 Main Content
2.1 - Loan/Lending
2.2- Types of Loans
2.3- Steps in lending process
2.4- Canons of Lending
2.5- Common types of loan collateral
2.6- Sources of Information about Loan Customers
2.7- Credit Policies
Introduction:
You are welcome to another study session. In this study session, you will
understand the concept of Loan, Canons of Lending as well as the Credit
Policies.

1. Explain the Concept of Loan.
2. Discuss the Canons of Lending as well as the Credit Policies.
7
2.0 Main Content
2.1. Loan/Lending
A loan is the act of giving money, property or other material goods to another
party in exchange for future repayment of the principal amount along with
interest or other finance charges. Bank loan is an amount of money loaned at
interest by a bank to a borrower, usually on collateral security, for a period of
time.
Lending money to customers is central to banking, as it is for many nonbank
lenders, such as finance companies and credit unions.
2.2. Types of Loans

1. Real estate loans
2. Financial institution loans
3. Agricultural loans
4. Commercial and industrial loans
5. Loans to individuals
6. Miscellaneous loans
7. Lease financing receivables
In-text Questions 1
2.3. Steps in lending process
1. What is a bank loan?
1. Finding prospective loan customers.
2. Evaluating a prospective customer’s character and sincerity.
3. Making site visits and evaluating a prospective customer’s credit record.
4. Evaluating a prospective customer’s financial condition.
5. Assessing possible loan collateral and signing the loan agreement.
7
6. Monitoring compliance with the loan agreement and other customer
service needs.
2.4. Canons of Lending

1. Character
2. Capacity
3. Cash
4. Collateral
5. Conditions
6. Control
2.5. Common types of loan collateral

Below are the most popular assets pledged as collateral for loans
1. Account receivable
2. Factoring
3. Inventory
4. Real property
5. Personal property
6. Personal guarantees
2.6. Sources of Information about Loan Customers

1. Information about customers (individuals and families) borrowing
money.
2. Information about businesses borrowing money.
3. Information about government borrowing money.
4. Information about general economic conditions affecting borrowers.
7
2.7. Credit Policies
Experience has shown that most lending officers tend to underplay the
importance of credit control and administration in their lending function
because of the difficulties associated with it. Loan officers dealing with
customers’ loan applications; usually exercise personal judgments in
authorising loans and disbursing such loans. This problem can however be
addressed where an institutionalised policy is put in place that guides
whoever is involved in the lending exercise on size, maturity structure, loan
mix, loan beneficiaries, security charged and the whole range of issues
associated with loan. This results in uniform and coherent approach to
lending.
In-text Questions 2
1. What is a lending policy?
In this study session, we have discussed the Concept of Loan, Canons of
Lending as well as the Credit Policies.

1. What is Credit policy? Why is credit policy needed?
2. Identify the necessary considerations when developing a credit policy.
3. Identify the contents of a credit policy document.
4. Identify the types of credit policies that exist.
5. What is a Loan Portfolio?
6. Identify the nine elements that should be part of a loan portfolio
management process.
7. Identify the types of risks associated with lending.
8. Elaborate on the significance of loan monitoring and supervision to a
7
banker? Do conventional banks monitor loans?
9. Credit policies of any bank should be rigid. Do you agree?.

a. Visit U-tube add https://goo.gl/WEnoNp Watch the video & summarise in 1
paragraph
b. View the animation on add/site https://goo.gl/tHfq7f and critique it in the

discussion forum
Answer 1
1. Bank loan is an amount of Readings
money loaned at interest by a bank to a borrower, usually on
collateral security, for a period of time. nd
Adekanye,
Answer 2 F (1984).The Element of Banking in Nigeria (2 Edition).
1. Lending policy is a document
Bedfordshire: that that guides whoever is involved in the lending
Graham Bum.
exercise on size, maturity structure, loan mix, loan beneficiaries, security charged and
Adekanye, F (1986).
the whole range Practice
of issues of with
associated Banking,
loan. Volume 1. Lagos: F & A Publishers
Ltd.
York: McGraw-Hill.
FEP Publishers Ltd.
Edition). New Delhi, India: PHI Learning Private Limited ISBN-978-81-
203-3022-1.
7
978-0-07-353062-8.
7
STUDY SESSION 3
Bank Regulation and Regulators I
Introduction
2,0 Main Content
2.1 - Bank Regulations
2.2- Reasons for Bank Regulation
2.3- Goals of Bank Regulation
Introduction:
understand the concept of banks regulation, reasons for banks regulation as well
as the goals of banks regulation.

1. Explain the concept of banks regulation.
2. Discuss the reasons for banks regulation as well as the goals of banks
regulation.
2.0 Main Content

2.1. Bank Regulations
Regulation of banks has been defined by Liwellyn (1986) as a body of specific
rules or agreed behavior either imposed by some government or other external
7
agency or self-imposed by explicit or implicit agreement within the industry
that limits the activities and business operation of financial institutions. In a
nutshell, it is the codification of public policy towards banks.
Deposit Money Banks obviously constitute an integral part of any nation’s

modern economy. They however cannot operate successfully without some
form of regulation to shape their operations. Bank regulation can be carried out
through enactment of relevant laws by government (e.g. Banks and Other
Financial Institutions Act, 1990) or through routine issuance of circulars and
other instruments by the central bank and deposit insurance corporation. The
range of issues over which regulations are imposed on banks include
registration, board appointments and its running, lending activities and other
banking operations within the economic landscape.
In-text Questions 1
1. Why can’t deposit money banks operate successfully without some form of regulation to
shape their operations?
Deposit Money Banks are dealers in debts. The vast majority of their assets are
the debts of others. In addition, their assets are financed in large part with debt,
i.e. demand deposits, time and savings deposits and long term borrowing.
While all their liabilities are fixed in value and over half of them are payable on
demand, demand deposit liabilities are the primary means of payment. This
imposes a need for skilful management of the matches between assets and
liabilities and also sound regulatory framework to enhance the stability and
safety of the entire banking industry.
2.2. Reasons for Bank Regulation

The rationale for bank regulation can be summarised as follows:
7
1. Efficiency
2. Diversity of choice
3. Competition
4. Stability of financial system
5. Macro-economic stability
6. Developmental and social objectives
2.3. Goals of Bank Regulation

Sinkey J. R (1989) states the goals of regulations as:
1. The protection of depositors.
2. The protection of the economy from the vagaries of the financial system.
3. The protection of banks’ customers from the monopolistic power of
banks.
In-text Questions 2
1. What are some of the reasons for bank regulation?
In this study session, we have discussed the concept of banks regulation,
reasons for banks regulation as well as the goals of banks regulation.
5.0 Self-Assessment Questions and Answers

1. Respond to the argument that asset management is sufficient without
consideration given to liability management.
2. Discuss any one theory of interest in which the rate of interest is
determinate.
3. Discuss what you understand by bank regulations

a. Visit U-tube add https://goo.gl/WEnoNp Watch the video & summarise in 1
8
paragraph
b. View the animation on add/site https://goo.gl/tHfq7f and critique it in the

discussion forum
Answer 1
1. Deposit Readings
Money Banks obviously constitute an integral part of any nation’s modern
economy nd
Adekanye,
Answer 2 F (1984).The Element of Banking in Nigeria (2 Edition).
1. Efficiency, DiversityGraham
Bedfordshire: of choice,Bum.
competition, stability of financial system,
macroeconomic stability and developmental and social objective.
Ltd.
York: McGraw-Hill.
FEP Publishers Ltd.
Edition). New Delhi, India: PHI Learning Private Limited ISBN-978-81-
203-3022-1.
8
978-0-07-353062-8.
8
STUDY SESSION 4
Bank Regulation and Regulators II
Introduction
2,0 Main Content
2.1 - Central Bank
2.2- The Nigeria Deposit Insurance Corporation (NDIC)
Introduction:
understand the role of the Central Bank of Nigeria in banking regulations as
well as the role of the Nigeria Deposit Insurance Corporation (NDIC) in
banking regulations.

1. Discuss the role of the Central Bank of Nigeria in banking regulations.
2. Discuss the role of the Nigeria Deposit Insurance Corporation (NDIC) in
banking regulations.
2.0 Main Content

2.1. Central Bank
A central bank is very different in both its organisation and functions compared
to other types of banking institutions. Since it is said to be at the apex of any
8
banking system. The law or charter that establishes a central bank is normally
very different from those other laws or legislation establishing other types of
banks.
A central bank is a government owned bank and each country owns only one
central bank. A central bank is therefore the government's representative in
the banking system and acts mainly as banker to the governments. It has a
very close association with both the government and the banking sector of an
economy, advising the government on monetary policies and implementing the
policies on behalf of the government. A central bank is a bank that a
government sets up to help handle its transactions; to co-ordinate and control
the commercial banks, most especially; and, most importantly to help control
the nation's money supply and credit conditions. All the advanced, free-market
economies must have, in addition to commercial and other types of banking
institutions, a central bank that is responsible for the control of money supply
and that must exert a very strong influence over major financial markets. A
central bank, as mentioned previously, is an instrument of the government,
whether it is in fact publicly owned or not.
ITQ 1: What is a central bank?
For instance, the oldest central bank in the world is the bank of England
established in 1694 as the first joint-stock bank. At this time, the bank was in
competition with the goldsmiths' banking business and other joint-stock banks
which were subsequently formed and made rapid progress, all issuing their own
Bank-notes. However, the bank was nationalised by the Bank of England Act,
1946, the existing stockholders being compensated by the receipt of government
stock. That Act included the clearest possible indication that the government was
to make itself henceforth solely responsible for the implementation of the
8
country's monetary policy. Just as the Bank of England, other nations' central
banks are solely and wholly owned by the central governments of those nations.
Examples abound: In Nigeria, the Central Bank of Nigeria established on the 1st
July 1959, has all its capital subscribed and held only by the federal
Government of Nigeria; in India, the Reserve Bank of India is owned by the
central government. Others include, the Federal Reserve System of America;
the Bank of France in France, the Riksbank Sweden, etc.
A true central bank performs four essential roles, though in some countries, but
not all, it has other roles; for instance in the United Kingdom and Nigeria, the
central banks are also responsible for managing the national debt and exercising
prudential supervision over the banking system. The four essential roles are:
 To issue the national currency;
 To conduct monetary policy;
 To act as lender-of-last-Resort; and
 To manage the exchange rate.
2.2. The Nigeria Deposit Insurance Corporation (NDIC)

The Nigeria Deposit Insurance Corporation (NDIC) is an agent of the Federal
Government of Nigeria established by Decree No. 22 of 15th June, 1988(now re-
enacted as NDIC Act 2006). It took off effectively in February, 1989 with most
of its key personnel drawn from the CBN. The NDIC has a board of directors and
Chairman.
The NDIC was set up to insure the deposit liabilities of licensed banks and other
deposit-taking financial institutions operating in Nigeria and also to provide
other related services for banks. It is aimed at promoting confidence in the
financial system.
8
In-text Questions 2
1. What are the basic roles of the central banks?
The Decree establishing it, empowered it to examine the books and affairs of
insured banks and other deposit-taking financial institutions. Every licensed bank
in Nigeria is required by this Decree to pay a certain premium of its deposit
liabilities.
The authorised capital of the corporation at the initial stage was N100 million out
of which N50 million had already been called and paid-up by the Federal
Government and the Central Bank of Nigeria in the ratio of 2 to 3. (i.e. 40% and
60% respectively). As at December 31, 1991, N80 million has been subscribed
and paid up under the same ratio. Section 10 of the NDIC Decree provides that the
Corporation's net operational surplus before taxation be transferred to a General
Reserve Fund. The balance of this Reserve Fund as at 31st December, 1991 stood
at N277.9 million.
In-text Questions 3
The decision by the Federal Government of Nigeria to establish the NDIC rests on
1. Why was the NDIC set up?
three cardinal considerations;
i. To protect the banking system against destructive runs;
ii. To protect the deposits of depositors, particularly the small savers who are
unlikely to have access to sufficient information that will enable them to
evaluate the solvency of those banks where they hold their savings; and
iii. To ensure fair play amongst the competing banks and thus lead to their
innovativeness and efficiency.
Accordingly, Decree No. 22 of 1988 established the NDIC by the Federal
8
Government to insure banks deposits thereby helping to promote safe and sound
banking system in Nigeria, protect depositors’ interest and further inculcate
banking habit amongst the Nigerian public. NDIC is an autonomous regulatory
body with powers among others, to examine the books and affairs of insured
banks and other deposit-taking financial institutions.
A depositor's claim is limited to a maximum of N20, 000 in the event of a bank

failure. However, the larger savers, too can claim in excess of the first N20,000
limit to which every depositor of a failed bank is entitled only on pro rata basis
from manager/receiver after due processes of law have been applied.
The direct support of problem banks by the Federal Government would not
continue under the Structural Adjustment Programme (SAP). In fact, with the on-
going privatisation drive, the Federal Government has almost completely divested
itself from direct financial support of banks and such other deposit-taking
financial institutions which are facing solvency problems.
In this study session, we have discussed the role of the Central Bank of Nigeria
in banking regulations as well as the role of the Nigeria Deposit Insurance
Corporation (NDIC) in banking regulations.

1. Discuss 5 major issues which come under the purview of bank regulation.
2. Evaluate any chosen regulatory issue in banking.

a. Visit U-tube add https://goo.gl/x1KDRe Watch the video & summarise in 1
paragraph
8
b. View the animation on add/site https://goo.gl/L2z9jz and critique it in the
discussion forum
Answer 1
ITA 1: A central bank is a government owned bank and each country owns only one central bank.
Answer 2
1. To issue the national currency, to conduct monetary policy, to act as lender-of-last-Resort; and to manage the exchan
Answer 3
1. The NDIC was set up to insure the deposit liabilities of licensed banks and other deposit- taking financial institutions

Adekanye, F (1984).The Element of Banking in Nigeria (2nd Edition).

Ltd.

(2008). Bank Management & Financial Services (7 th International

FEP Publishers Ltd.

Edition). New Delhi, India: PHI Learning Private Limited ISBN-978- 81-
203-3022-1.

8

978-0-07-353062-8.

8
FURTHER READING
1. Peter, S. R & Sylvia, C. (2008). Bank Management & Financial Services

(7th International Edition). New York: McGraw-Hill.

McGraw-Hill Publishing Company limited.



Publishers Ltd.

ISBN-978-81-203-3022-1.

8. Ross, S.A., Wesrerfield, R.W. and Jordan, B.D. (2008) Fundamentals of

978-0-07-353062-8.
9. Vanhorne, J.C (2006). Financial Management and Policy (12 th Edition).

10. Weston, J. Fred & Brigham, F. Eugene (2002). Managerial Finance (7 th

11.Berk, J & Demarzo, P (2011). Corporate Finance (2 nd Edition). India:

Pearson Education Inc.
9
12.Vanhorne, J. C & John, M. Machowicz (2004). Fundamental of Financial
Management (11th Edition). Pearson Education Inc.
13.Brigham, E. F (1997). Financial Management: Theory & Practice. The

Dryden Press.
14.Ross, S.A., Westerfield, R.W & Jeffrey, J (2002). Corporate Finance (4th
Edition). New York: McGraw Hill Irwin.
15.Weston, J. Fred & Copeland, T. E (1998). Managerial Finance (7th

Edition). UK: The Cassel Publishing House.
16.Bodie, Z., Kane, A & Marcus A. J (1998). Essentials of Investment (3rd

Edition). New York: McGraw Hill Irwin.
9
GLOSSARY
1. Balance sheet: List of firm’s assets and liabilities and a snapshot of its
financial position as at a given time.
2. Bank asset: What a bank owns, including loans, reserves, investment
securities, and physical assets.
3. Bank liability: What a bank owes, including most notably customer
deposits.
4. Bankers’ acceptance: papers accepted by bank by guarantee of
payment on maturity if issuing company defaults.
5. Banking regulation: A form of government regulation which subject
banks to certain requirements, restrictions and guidelines.
6. Bonds: Debt obligations issued by company or government.
7. Capital market: Market for short term financial transactions.
8. Classical theory of interest: A theory which recognizes rate of interest
as determined by supply and demand of capital.
9. Commercial paper: Short term promissory notes which companies sell
at discount to individual and institutional investors.
10.Credit policy: Clear, written guidelines that set the conditions on
granting bank credit and steps to be taken in case of customer default.
11.Discount house: Primarily operating in the United Kingdom, a firm that
buys, sells, discounts and/or negotiates bills of exchange or promissory
notes.
12.Financial institution: An establishment that focuses on dealing with
financial transactions, such as investments, loans and deposits.
13.Finance house: are specialists in assisting funding all types of business
assets providing financing solutions for the small to medium business
sector.
9
14.Financial market: is a market in which people and entities can trade
financial securities, commodities, and other fungible items of value at low
transaction costs.
15.Financial statement: Firm issued accounting reports with past
performance information.
16.Financial system: is a conglomerate of various markets, instruments,
operators, and institutions that interact within an economy.
17.Interest rate: An interest rate is the rate at which interest is paid by
borrowers.
18.Jobber: A tradesman, who deals in small jobs or acts as an agent,
middleman, or a sub-contractor, and usually does not deal directly with
the principal customer.
19.Liquidity preference theory: A theory which recognizes rate of interest
as determined by supply and demand of money.
20.Loanable funds theory: A theory that states rate of interest is the price
that equates the demand for and supply of loanable funds.
21.Loan portfolio: Loans that have been made or bought and are being held
for repayment.
22.Money market: Market for short term funds and short term financial
transactions.
23.Stock broker: somebody who buys and sells stocks, shares, and other
securities for clients.
24.Stock exchange: Market where quoted companies can raise new funds by
issuing new shares or loan stock.
25.Time preference theory: A theory that examines the nature of
consumerism, and the factors that influence consumers to delay current
consumption or expenditures.
26.Treasury bill: Promissory notes issued by government to borrow or
withdraw money from money market for short periods.
9
N.B: For comprehensive listing and definition of Business terms see Oxford
Business Dictionary.

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DISTANCE LEARNING CENTRE

AHMADU BELLO UNIVERSITY

Programme Title: Master in Business Administration (MBA)

First published 2018 in Nigeria.

Ahmadu Bello University e‐Learning project,

Subject Matter Expert (s)

Subject Matter Reviewers

3.0 Module 3: Bank Management

ii. COURSE INTRODUCTION AND DESCRIPTION

iii. COURSE PREREQUISITES

iv. COURSE LEARNING RESOURCES

vi. ACTIVITIES TO MEET COURSE OBJECTIVES

Specifically, this course shall comprise of the following activities:

vii. TIME (TO COMPLETE SYLABUS/COURSE)

viii. GRADING CRITERIA AND SCALE

B. Summative assessment (Semester examination)

C. Grading Scale (as appropriate for the course):

1 Study Session 1: 1. Read Courseware for the corresponding Study Session.

2 Study Session 2 1. Read Courseware for the corresponding Study Session.

4 Study Session 4 1. Read Courseware for the corresponding Study Session.

8 Study Session 3 1. Read Courseware for the corresponding Study Session.

13 Study Session 4 1. Read Courseware for the corresponding Study Session.

Week 14 & 15 REVISION/TUTORIALS (On Campus or Online)

Week 16 & 17 SEMESTER EXAMINATION

MODULE 2: Financial Instruments

MODULE 3: Bank Management

1.0 Study Session Learning Outcomes

2.0 Main Content

4.0 Self-Assessment Questions

6.0 Additional Activities (Videos, Animations & out of Class activities)

b. View the animation on add/site https://goo.gl/quj5Ur and critique it in the

1.0 Study Session Learning Outcomes

2.0 Main Content

A commercial bank is a bank whose business includes the acceptance of deposits

5.0 Self-Assessment Questions

b. View the animation on add/site https://goo.gl/24H996 and critique it in the

2. Adekanye, F (1986). Practice of Banking, Volume 1. Lagos: F & A

1.0 Study Session Learning Outcomes

2.0 Main Content

2.2. Different Types of Non-Banking Institutions

5.0 Self-Assessment Questions

6.0 Additional Activities (Videos, Animations & out of Class activities)

b. View the animation on add/site https://goo.gl/24H996and critique it in the

7.0 References/Further Readings

1.0 Study Session Learning Outcomes

Participants in the market include; the commercial banks-the most dominant of

2.3. Stock Exchange

2.4. Functions of Nigeria Stock Exchange

5.0 Self-Assessment Questions

2. What roles do stock exchanges play in an economy?

3. How do stock exchanges operate?

4. Write extensively on the following:

(a)Bull/ Charging Bull/Bull Market

5. Give a detailed write up on the Nigerian Stock Exchange.

6. Identify the basic legislations that guide transactions in the stock

6.0 Additional Activities (Videos, Animations & out of Class activities)

b. View the animation on add/site https://goo.gl/JAc15G and critique it in the

8. Ross, S.A., Westerfield, R.W. and Jordan, B.D. (2008) Fundamentals of

10.Weston, J. Fred & Brigham, F. Eugene (2002). Managerial Finance (7th

1.0 Study Session Learning Outcomes