Inside Abuse: A Threat to Banks' Stability

Abstract

The study investigates the relationship between insider abuse and banks' stability in Nigeria for a period of twenty-two (22) years (1997 to 2019). The rationale for this study is based on the fact that insider abuse is unanimously regarded as one of the major threats to banks' stability across the globe. In order to provide a dynamic perspective for the study, four insider abuse related factors such as internal fraud (INSAB), automated machine fraud (ATMf), internet/Web fraud (ITWEB) and cheque fraud (Cf) were regressed against bank stability (BST). Employing the ordinary least square (OLS), the empirical results revealed that internal fraud (INSAB) and internet/Web fraud (ITWEB) have significant negative relationship with banks stability. Automated machine fraud (ATMf) significantly impacts banks stability, and while cheques fraud (Cf) does not have significant impact on banks stability in Nigeria within the period of investigation. The study recommends among others that, since, insider abuse internal fraud is a major factor affecting banks stability in the country, management should strengthen their internal control mechanism by way of ensuring that prospective and qualified workers with cognate integrity are employ to work in the banking industry. This would to a large extent reduce the huge amount of money involved in the incidences of banks' related frauds and hence, assures continuous stability of the Nigerian banking sector. Also, appropriate policies aimed at devising measures for curbing or checkmating associated fraud in the use of internet/Web, and ensuring banks' stability and performance must not be overlooked by the Central Bank of Nigeria (CBN) and other relevant regulatory agencies.