The Role of IFRS in Enhancing Credit Risk Management in Nigerian Banking Sector
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Background of the Study
Credit risk management is a crucial aspect of banking operations, as banks need to assess, manage, and mitigate the risks associated with lending. The adoption of International Financial Reporting Standards (IFRS) has provided a standardized approach to financial reporting, enabling banks to assess credit risk more accurately. IFRS compliance introduces more robust disclosures, transparency, and valuation standards that can enhance the management of credit risk in Nigerian banks. This study seeks to examine how IFRS adoption has influenced credit risk management practices in Nigerian banks.
Statement of the Problem
While the adoption of IFRS is expected to improve the quality of financial reporting and risk management in the banking sector, some Nigerian banks may still face challenges in fully implementing IFRS-compliant risk management systems. This study aims to investigate how IFRS has influenced the practices of credit risk assessment, mitigation, and management in Nigerian banks, and whether it has led to better credit decision-making.
Aim and Objectives of the Study
The aim of this study is to evaluate the role of IFRS in enhancing credit risk management in Nigerian banks.
The objectives are:
- To assess the impact of IFRS compliance on credit risk assessment and management practices in Nigerian banks.
- To examine the role of IFRS disclosures in improving the transparency and accuracy of credit risk reporting.
- To identify the challenges Nigerian banks face in integrating IFRS into their credit risk management strategies.
Research Questions
- How does IFRS adoption influence credit risk assessment and management practices in Nigerian banks?
- What role do IFRS disclosures play in enhancing the transparency and accuracy of credit risk management in Nigerian banks?
- What challenges do Nigerian banks face in adopting IFRS for credit risk management?
Research Hypotheses
- IFRS compliance positively influences credit risk assessment and management practices in Nigerian banks.
- IFRS disclosures lead to improved transparency and accuracy in credit risk reporting in Nigerian banks.
- Challenges related to IFRS implementation hinder effective credit risk management in Nigerian banks.
Significance of the Study
This study will provide valuable insights into the relationship between IFRS adoption and credit risk management in Nigerian banks. The findings will be useful for policymakers, regulatory bodies, and financial managers in improving credit risk management strategies and ensuring financial stability in the Nigerian banking sector.
Scope and Limitation of the Study
The study will focus on Nigerian commercial banks that have fully adopted IFRS. Limitations include potential challenges in obtaining data on credit risk management practices and varying levels of IFRS implementation among banks.
Definition of Terms
- IFRS: International Financial Reporting Standards, a set of accounting guidelines that enhances the comparability and transparency of financial statements.
- Credit Risk Management: The process by which banks identify, assess, and mitigate the risks associated with lending activities.
- Credit Risk: The possibility that a borrower will fail to repay a loan or meet its financial obligations.
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