ESG Report of Skyebank

• The board has an annual strategic plan and works as a team to achieve its objectives.

• The board is involved in capital planning, annual budgeting, approval of financial statements and strategy monitoring.

• The board meets at least once every quarter.

• A third of the directors (the longest serving directors retire from office at each AGM, and if eligible submit themselves for re-election.

EXTERNAL ENVIRONMENT

Banking business is the business of receiving money on current or deposit account, paying and collecting cheques drawn by or paid in by customers, the making of advances to customers, and includes such other business as the authority may prescribe. Most bank product development are easy to duplicate and when banks provide nearly identical services, they can only distinguish themselves on the basis of price and quality (Cohen et al, 2006).

According to Kaynak and Kucukemiroglu (1992) the banking industry is highly competitive, with banks not only competing among each other; but also with non-banks and other financial institutions. Therefore, banking operations are influenced by both internal and external factors.Internal factors determining bank performance and influencing their operations according to Solomon (2012) include credit policy of the banks,relationship with workers, investment decision policies, corporate objectives and goals etc. He further highlighted some of the external factors influencing banking operations to include policies of the Central Bank, Federal government fiscal operations, globalization, customers banking habits, infrastructures etc.

Thus, external environment are factors outside the premise of banks which affects the operations of the banks (Riley, 2012). These factors include:
1. Social– how consumers, households and communities behave and their beliefs. For instance, changes in attitude towards health, or a greater number of pensioners in a population.

2.Legal– the way in which legislation in society affects the business. E.g.changes in employment laws on working hours.

3.Economic– how the economy affects a business in terms of taxation,government spending, general demand, interest rates, exchange rates and European and global economic factors.

4. Political– how changes in government policy might affect the business e.g.a decision to subsidize building new houses in an area could be good for a local brick works.

5.Technological– how the rapid pace of change in production processes and product innovation affect a business.

6.Ethical– what is regarded as morally right or wrong for a business to do. For instance should it trade with countries which have a poor record on human rights

There is no gain saying the fact that globalization has brought about intense competition in the financial services industry and this necessitates that those firms in this industry operate at their best. According to Emmanuel and Adebayo (2011) to remain competitive, firms need to be flexible to be able to respond rapidly to the fast changing market environment to which they are exposed.

Actually, banking environment worldwide has become transformed over the years and the banking public has become more sophisticated in their purchase decisions. To respond to increasingly sophisticated customer and market demand therefore, banks need to put in place operational processes that ensure greater customer convenience,better delivery of and increased accessibility to financial services and products. Abaenewe, Ogbulu, and Ndugbu, (2013),

On examining the role of electronic banking in influencing banking operations in Nigeria observed that the automation of banks make transaction and data processing very easily accessible for quick management decision making. This led to another level of benefit which ushered in what is today referred to as electronic banking.

Electronic banking helps the banks to speed up their retail and wholesale banking services. The banking industry believes that by adopting the new technology – e-banking, the banks will be able to improve customer service level and tie their customers closer to the bank (Yang,Whitefield and Bhanot, 2005).

According to Simpson (2002), what actually motivates the investment in electronic banking is largely the prospects of minimizing operating costs and maximizing operating revenue.Credit creation is the main income generating activity for the banks. But this activity involves huge risks to both the lender and the borrower. The risk of a trading partner not fulfilling his or her obligation as per the contract on due date or anytime thereafter can greatly jeopardize the smooth functioning of bank’s business.

On the other hand, a bank with high credit risk has high bankruptcy risk that puts the depositors in jeopardy. In a bid to survive and maintain adequate profit level in this highly competitive environment, banks have tended to take excessive risks. But then the increasing tendency for greater risk taking has resulted in insolvency and failure of a large number of the banks.

The major cause of serious banking problems continue to be directly related to low credit standards for borrowers and counter-parties, poor portfolio management, and lack of attention to changes in economic or other circumstances that can lead to deterioration in the credit standing of bank’s counter parties. And it is clear that banks use high leverage to generate an acceptable level of profit. Credit risk management comes to maximize a bank’s risk adjusted rate of return by maintaining credit risk exposure within acceptable limit in order to provide a framework of the understanding the impact of credit risk management on banks profitability (Nawazet al, 2012). Thus, to ensure that banks are put in check, Central Banks regulate banking operations through monetary policies.

These policies reduces or decreases banking credit to the economy.Another factor influencing banking operations is government fiscal operations for the year. A government going to fiscal expansion releases more money which increases the amount of money in circulation and in the banks; this influences banking decision to increase credit delivery. Moreover, where government decides to adopt a fiscal deficit, it borrows money from the banks and reduces their credit delivery to the private sector.

Monetary policy is one of the major economic stabilization weapons which involve measures designed to regulate or control the volume, cost, availability and direction of money and credit in an economy to achieve some specific macro-economic policy objective. it is a deliberate attempt by the monetary authority(Central Bank) to control the money supply and credit condition for the purpose of achieving certain broad economic objective (Onouorah et al., 2011).  Okpara (2010)defined monetary policy as a measure designed to influence the availability, volume and direction of money and credits to achieve the desired economic objectives.

The central bank is responsible for the conduct of monetary policy to pursue those objectives. Central banks in the world such as the Central Bank of Nigeria(CBN) often employ certain monetary policy instruments like bank rate, open market operation changing reserve requirements and other selective credit control instruments. Central bank also determines certain targets on monetary variables. Although, some objectives are consistent with each others; others are not. for example, the objectives of price stability often conflicts with the objectives of interest rate stability and high short run employment. The role of the banking industry in development process cannot be over-emphasized as they play so many functions.