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This section present the results for the content analysis for the 9 categories of credit risk disclosures as contained in annual report of banks in United Kingdom and in Nigeria. Section 5.1 outlines the sample, the results for the total number of pages of annual report are presented in section 5.2 while section 5.3 deals with result of the total sample lastly, section 5.4 deals with the analysis of sub categories.
Data used for this study were taken from 2009 annual report of top five banks listed on the London stock exchange. The banks are located in the FTSE 100 1, they are Hong Kong and Shanghai Banking Corporation (HSBC), Barclays Bank plc, Standard Chartered, Royal Bank of Scotland and Lloyds Banking Group. In Nigeria, the Nigerian Stock Exchange (NSE) is not as developed as the London Stock Exchange (LSE). I decided to use top five banks with the highest market capitalization for the analysis. See Table 5.0. From the table the most capitalized bank in Nigeria is Zenith bank Nigeria plc followed by guarantee trust bank, first bank Nigeria plc, united bank Nigeria plc and Stanbic IBTC Nigeria plc. The aim is to compare compliance of credit risk disclosures as contained in the risk management disclosure guildline published by the Basel Committee on Banking Supervision in 2003 by Nigeria banks with its United Kingdom counterpart.
Table 5.0 Banks in Nigeria and their market capitalization
Zenith Bank Nigeria Plc
Guarantee Trust Bank
First bank Nigeria Plc
United Bank for Africa
Stannic IBTC Nigeria plc
In this study, nine different categories were applied to check compliance of Nigerian banks with credit risk disclosures guildline issued by the Basel Committee on Banking Supervision in 2003.
The table 5.1 display the number of pages of annual report for banks in Nigeria and United Kingdom. The columns 1 and 3 display banks in United Kingdom and Nigeria while columns 2 and 4 show the total number pages of the annual report. From the table below the total number of pages devoted for annual report banks in United Kingdom were 1522 pages which are almost triple the number of pages of annual report for banks in Nigeria. The mean of total annual report for banks in United Kingdom was 304.4 whereas mean for Nigeria banks was 126.4. I decided not to use Total sample as a percentage of annual report because I discovered that the number total number of pages devoted to annual report by Nigeria banks is low compared to banks in the United Kingdom which cannot be used as good basis of comparison .
5.1Total number of Pages of annual report of banks in United Kingdom and Nigeria
Banks in Uk
No of pages
Banks in Nigeria
No of pages
Standard chartered bank
5.3Result for the total sample
Table 5.2 display the result of the nine categories of credit risk for banks in United Kingdom and Nigeria. Columns 1 and 5 of highlight the mean while standard deviations of the means are presented in columns 2 and columns 6. Columns 3 and 7 display the minimum values of the mean while columns 4 and 8 show the maximum values of the means.
Table 5.2 Total sample - number of pages of credit risk disclosure
Banks in united kingdom
Banks in Nigeria
Type of disclosure
Strategies and processes
Structure of risk management function
Nature of risk reporting
Policies for mitigating risk
General Qualitative requirement
Total gross credit risk exposures
Geographic distribution of exposures
Industry or counterparty type distribution of exposures
Amount of past due/impaired loans
A number of points emerged from the table above The mean number of pages devoted to credit risk on the annual report of banks is Nigeria is low as compared with its counter. The mean number for Nigerian banks was 6.4776 compared to 11.0330 of the banks in the United Kingdom.
There is wide difference in spread across the nine sub-categories in UK banks and Nigerian banks. In banks in the United Kingdom it was largest for "Amount of past due/impaired loans, Policies for mitigating risk" categories (2.5188 and 1.9315) while the largest for banks was "Amount of past due/impaired loans and Policies for mitigating risk" categories (0.9193and 1.5222). The smallest for banks in the united kingdom was Strategies and processes, Geographic distribution of exposures and Industry or counterparty type distribution of exposures categories (0.2684, 0.2596, 0.2596), the smallest for banks in Nigeria was total gross credit exposure and Strategies and processes categories (0 and 0.2649). The maximum value for banks in United Kingdom was 8.2 whereas it was 3.6395 for banks in Nigeria. The minimum value for banks in United Kingdom and banks in Nigeria was 0. Nature of risk reporting has the highest gap between the maximum and minimum values for banks in the United Kingdom which stood between 0 and 5 while Policies for mitigating risk has the highest gap between the maximum and minimum values for banks in Nigeria which is around 0 and 3.6395.
5.4 Analysis of each sub categories
The bar charts 1and 2 display the mean result plotted against the nine categories of credit risk for banks in UK and Nigeria. The pie charts are based of numbers of pages counted. A number of points emerge from visual inspection of charts 1 and 2.
The mean value devoted to structure of risk management was 0.9323 by banks in United Kingdom while 0.2747 was devoted to it by banks in Nigeria. Analysis of information disclosed by Nigeria showed that showed that the mean value is low when compared to what is expected of by the Basle committee on supervision. For instance, only two banks provide quality information about the stricture of risk management. The Stanbic ibtc provided information like functions of the board responsible for risk management and roles of the board of directors and policies while banks all the banks in the United Kingdom provided on form of information about the structure of risk management. Royal bank of Scotland (RBS) for instance, outlined the key responsibilities of credit risk management committee to include, assessment of credit risk of customer before approval of any loan and customers with problems are discovered on time to mitigate any loan to the organization.
The mean value devoted to nature of risk reporting for banks in United Kingdom was 1.5609 while the mean value devoted it by banks in Nigeria was 0.7904 . Infact, about five pages of the total annual report was devoted to it by Barclays bank. All the banks disclosed parameters they used to measure credit risk to include, Exposure at default (EAD), Probability of default (PPP) and Loss given default (LGD) while none of the banks analysed disclosed such information whereas non of these were mentioned by banks in Nigeria
The mean score of the bar chart devoted for policies for mitigating risk for banks in United Kingdom was 1.1480; it was 0.779 for banks in Nigeria. Two banks out of the banks analysed did not disclose any information about policies for mitigating risk, whereas for instance Lloyd Tsb disclosed the following strategies to mitigate credit risk, they are internal control, collateral and master netting agreement.
The pillars 3 requires banks to disclose their Total gross credit risk exposures, plus average gross exposure over the period broken by major types of credit exposure but None of the Nigerian banks analysed disclosed its total gross credit exposure whereas the banks in united kingdom, the mean value devoted to it was 0.6563.
In terms of geographic distribution of risk and industrial distribution of risk, from the mean values of these categories of risk disclosed by banks in Nigeria exceed that of the banks in the United Kingdom. For instance, the mean values for industrial distribution of exposure for Nigeria was 0.940, it was 0.6933. The following types of information were disclosed by banks in Nigeria, geographic distribution of exposures by bank and group for year 2008 and 2009 while some banks in the united kingdom like did not disclose any information. The mean value for geographical exposure for banks in Nigeria was 0.7284, it was for banks in united kingdom 0.6933. The reason for this was the prudential guideline issued 1998 by the Central Bank of Nigeria (CBN)in order to bring harmony in reporting loan provision and classification of risk asset.
Lastly, in terms of amount of past due/impaired loans, the following types of quantitative information were disclosed by banks in United Kingdom. They Analysis of loan impairment charge, Movement in loan impairment provisions and neither past due nor individually impaired; past due but not individually impaired and individually impaired, which includes restructured loans for the year 2008 and 2009 while the following discourse were made by banks in Nigeria, they are: Performing but Past Due Loans, Non performing by geography and non performing by industry. The mean value for amount of past due/impaired loans for banks in United Kingdom was 4.4983 whereas it was 1.6245 for banks in Nigeria.
The chapter has documented the various aspects of corporate governance in Nigerian banks as published in the annual reports in relation to what applies in the banks in United Kingdom. I can summarise by saying that the result from the content analysis of the annual reports are enough to help me formed an opinion on the level of corporate governance in the Nigeria banking sector.
The next chapter highlight the summary of the main findings, limitation of the research, recommendations and conclusions.