The Relationship between the Risk Management Committee and the Chief Risk Officer with the Stability of Nigerian Banks

Abstract

Bank stability is vital not only to the banking industry, but the overall national economy. If banks are not stable, national economic growth and development would be retarded. However, banks could not be stable in an environment of high risk and prevalence of moral hazards. There is a need for mechanisms that would restrain bank management from actions that could cause instability. This paper examines bank stability and its relationship with the risk management committee (RMC) and the chief risk officer (CRO) and how these could aid the board in ensuring that banks are stable in Nigeria employing data from 2006-2016. With the aid of panel regression, the result shows that though prior literature recognized the importance of the RMC and the CRO, in Nigeria it seems the situation differs. It suggests that the RMC and the CRO could not effectively restrain the excesses of the management. It further shows that weak boards and ineffective committees could have been responsible for the insignificant effects of the RMC and the CRO. Bank stability would be ensured if risk governance is reformed especially improvements in the efficiency of board committees.