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CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF STUDY

The control of customer’s accounts by commercial banks dates back to a very long time and the genesis can be said to be of a very humble nature.  Long before there were any banks, people kept money and valuables with the goldsmith for safe custody because the goldsmith in those days were highly respectable members of the society who could be trusted because they had strong sets where they kept valuable.  As time went on, the goldsmith observed that the depositors needed and therefore collected only a little amount of their money at any particular time.

The goldsmith then formulated a system thereby he would control and safeguard the money deposited with him properly in such a way that while he traded with the depositors money, he had enough cash to meet any depositors needs at any time, that is, this carefully designed system of control enabled the goldsmith to always ensure that he was never short of cash when any depositor needed some or all of his money.  This trend continued, but as the years went by, different changes occurred until banks came into existence. According to the Oxford Advanced Learners Dictionary of Current English, a bank is an establishment for keeping money and valuables safely the money being paid out on the customers order.  “A commercial bank is described as a bank whose business includes the acceptance of deposits withdrawable by cheque.

In Nigeria, the Central Bank of Nigeria hereafter referred to as “CBN” is the apex regulatory authority of the financial system.  The banking system of various countries vary considerably, however, they all tend towards the central banking system.  The systems that are tendable in Nigeria fall into the following parts: CBN, Commercial Banks, Merchant Banks, Mortgage Banks, Community Banks, Urban Development Banks and a Peoples Bank.  However, these distinction are merely evident by their names.  In terms of operations, this is because, they have long abandoned their traditional roles and gone into finance distributive trade, but essentially, their main business is to lend and borrow money.

Commercial Bank are very important in the economy because without their operation business activities will be at a standstill and normal transactions will handicapped.  These commercial banks are also the traditional “department stores” of finance, they serve a wide variety of savers and those with needs for finds. Commercial Banks are the center of focus in this project.  In any commercial bank; the basic activity is the accounts kept by customers, this is to say that a commercial bank cannot exist without any customer’s accounts so the proper control of these customers’ account is beneficial to both the customers and the bankers.  Control refers to the methods and mechanisms used to ensure that behaviours and performance confirm to an organizations objectives plans and standards. Incidentally, the control of customer’s accounts has a very high relevance to the growth of a commercial bank.  Some bankers (especially the management of some commercial banks) are not proper and efficient control of customers accounts to the growth of the commercial banks, and as a result, they tend to lose customers, which affect the commercial banks adversely. In view of all the aforementioned the purpose of this project is to identify the methods of control of customers accounts used by commercial banks, and then to make recommendations and suggestions so as to ameliorate the existing problems and to improve the overall control of customers accounts by commercial banks.

1.2   STATEMENT OF THE PROBLEM

The livewire of commercial banks is the accounts of their customers keep with them.  These customers make deposits into their various accounts as often as it is possible.  Hence, the significance of deposits cannot be overemphasized this is because it is a crucial factor in determining the strength and capability of the commercial bank.  It is expected that the management of commercial banks will ensure that they erect a firm, effective and adequate control system over the customers accounts.

This study seek to address and explain how commercial banks control their customers accounts, the procedures used, the formalities that have to be undergone and the bank staff that are responsible for these jobs at the different stages.  To achieve these in this project, the following will be sought.

The extent to which management monitor and control those in charge of the operation of the customers accounts.

Which arm of management is responsible for it control of customers accounts?

An investigation into the problems which management undertake to ensure that proper accounting entries are made for the transaction each customer makes on behalf of his account.

The processes that management undertake to ensure proper and effective control of the customer’s accounts.

Are there any rules and guideline laid out by the management of commercial banks for the control and operation of the customer’s accounts?

Could the processes the control of customers accounts undergo determine the profitability and viability of the commercial banks?

In summary, the most essential problem this study seeks to investigate is the extent or degree to which the commercial banks understand have installed an adequate system of control over customer’s accounts as a means of satisfying the customer and to guarantee their trust and constant patronage.

1.3  OBJECTIVES OF STUDY

The main research objectives of this project is to study the way commercial bank control the customer’s accounts, more specifically, the objective of this study are:-

i. To find out the aim of management of the commercial bank responsible for the control of customers account.

ii. To find out ways through which commercial banks generally operates their customer’s account.                                          

iii. To find out how the proper control of customers accounts contribute to the profitability of the commercial bank.

iv. To find out whether the staff undergoes proper training qualifying them to handle the account of customers.

v. To find out whether customers spend so much time in the banks.

1.4  SIGNIFICANCE OF STUDY

It is obvious that there is no way the system of control of customers accounts in any commercial bank can be water light.  But if management set up a good and firm method of controlling customers account it will be an indispensable aid to efficient management in that it will ensure the management and staff incharge of the control of customers accounts that the rules laid down are strictly adhered to.  It also assures them that the objectives of the banks will be achieved in future.

The significance of this study is that it will bring to light the importance of having an adequate system of control of customer’s accounts by commercial banks (especially the new breed banks).  It will also show these banks some important activities, which they have taken for, granted in the control of customer’s accounts and this may make them do their work more diligently.  The recommendations made by the project writer, should be useful to the management of some commercial banks because it will help them fill be loop holes present in their own methods of control of customer’s accounts.  As a result of this, they will be able to satisfy their existing customers and as well be able to attract more customers.

These days, many banks are becoming distressed because of lack of proper control of their customers accounts and subsequently decreased deposits and increased withdrawals by customers, this study, shows the proper processes of safeguarding and controlling the customer’s accounts and other suggestions with regards to this which these new breed banks can adopt.  This study therefore has a lot of significance to the banking industry.  Other individual and holders of accounts in banks will benefit from his study because they will now be able to understand the extent to which the banks go to take care of their money and accounts and they will also understand why spend so much time in the banks.

Also, students will benefit from this study as they can read up some information they may seek in commercial banks and customer’s accounts. Finally, the entire work will no doubts be useful to other researchers who would wish to conduct a research on the same topic, and even for research in fields outside the scope covered, this research will serve as a useful source of background information.

1.5  DEFINITION OF TERMS

We want to look at some terms relevant to the banking practice.  These are the changes:

i.  Drawer: He is the person who writes and signs the cheques.

Usually he is the current account holder or has agent.

ii. Drawee:This is the banker on whom the cheque is drawn and to whom the order to make payment is given.

iii. Payee: This is the beneficiary of the cheque or the person to whom the cheque is payable.

iv. Commission:This are charges the bank makes from the customers as regarding services rendered to their current accounts.

v. Dormant account: A dormant account is one which has not been operated by the customer for a considerable length of time ranging from three months to two years.                 

vi. Bank statement:This is a statement showing transactions of the customer with the bank for a specific period and these statements are sent to the account holder periodically.

vii. Endorsee:The person to whom the title on a cheque is passed by endorsement.

viii. Endorser: The person who passes on the title on a cheque to another by placing his signature on the back of the cheque.

ix. Capital: This is amount used in the starting of a project.

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