CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 History of Computer
A computer is a piece of electronic equipment which accepts inputs inform of data
and uses predefined instructions known as computer programs to execute the tasks
in order to produce output.
The specific combination of machines used in a particular computer system is referred
to as a configuration. This study deals with the role of computerization in
commercial banks. The chapter will be devoted to make references to the related
work on the role of the computer generally and its effects in commercial banks in
particular
With the introduction of computer which is capable of taking complex discussions
based on available data at very fast speed, its uses had to extend to the credit
management. As information and the decision produced by computer will only be
good as the data fed into. It is necessary to consider accumulation of data for credit
management.
The impact of computer in commercial banks leads to economic development and
trade. The application and role of computers to the economy was the theme of 1983
computers Association of Nigeria conference. Widespread use of computers in
industries, private business and can lead to widespread Increase in national work
efficiency and productivity (Woherem, 2000).
2.2 Overview of Bank
Cronin, Mary J. (1997). The term "bank" may refer to one of several related types of
entities:
A central bank circulates money on behalf of a government and acts as its
monetary authority by implementing monetary policy, which regulates the
money supply.
A commercial bank accepts deposits and pools those funds to provide credit,
either directly by lending, or indirectly by investing through the capital markets.
Within the global financial markets, these institutions connect market
participants with capital deficits (borrowers) to market participants with capital
surpluses (investors and lenders) by transferring funds from those parties who
have surplus funds to invest (financial assets) to those parties who borrow
funds to invest in real assets.
A savings bank (known as a "building society" in the United Kingdom) is similar
to a savings and loan association (S&L). They can either be stockholder owned
or mutually owned, in which case they are permitted to only borrow from
members of the financial cooperative. The asset structure of savings banks and
savings and loan associations is similar, with residential mortgage loans
providing the principal assets of the institution's portfolio.
Because of the important role depository institutions play in the financial system, the
banking industry is generally regulated with government restrictions on financial
activities by banks varied over time and by location. Current global bank capital
requirements are referred to as Basel II. In some countries, such as Germany, banks
have historically owned major stakes in industrial companies, while in other
countries, such as the United States, banks have traditionally been prohibited from
owning non-financial companies. In Japan, banks are usually the nexus of a cross-
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shareholding entity known as the "keiretsu". In Iceland, banks followed international
standards of regulation prior to the recent global financial crisis that began in 2007.
The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in
Siena, Italy, which has been operating continuously since 1472.
A Bank's main source of income is interest. A bank pays out at a lower interest rate
on deposits and receives a higher interest rate on loans. The difference between
these rates represents the bank's net income (Ovia, 2000).

2.3 Computer in Financial Institutions

In Banking and finance institutions, computers are used in preparing different types
of accounts, processing of customers cheques paying customers updating and
displaying of customers statement of accounts. The director of research at the
central bank uses the computer timesharing service to prepare weekly reports for the
use of top bank executives. Such reports help in decision making regarding assert
management; performance of other bank, deposits and loan flows and enhance bank
profitability.

Scientific and file processing application account for the bulk of all computer usage,
most business application lit into the file processing is not limited to business but it is
better done with the computer in banking.
In commercial banks, computers are used by credit managers to analyze a firms
financial standing in order to make Decision about credit terms. A number of
computer application programs that have financial planning users have been planned
among their affective uses are programs to calculate cash flow analysis, time services
forecast, loan and interest rates analysis of banks and stock, capital investment
analysis (Ovia, 2000).

2.4 The Impact of Computerization in Banking Industry

Some commercial banks use the automatic teller machine, that Machine allows you to
carry and banking transactions without actually having to intercede with your
bankers. The Automatic Teller Machine (ATM) allows you to deposit and withdraw
money from your bank account with the aid of the card. A customer puts the cash in
the machine, type in a secret code and then take out cash or makes deposit without
ever seeing the banking clerk. One of the role and effects of computerization is that it
saves time and leads to greater productivity in commercial banks (Agboola, 2001).
Computerization is expected to generate cost saving resulting from the improvement
of operational procedure by using computer equipments for ordinary labour intensive
duties in majority or operational procedure receptive and clerical in nature. Also a
staff consists of a largest simple group these generating considerable costs in wages
and benefits with the use of computers.
It is large number of these clerical duties would be automated given rise to reduced
staff cost as these staff are deployed to more productive sector. Their services
dispense of banks that have computerized their staff although they have been able to
shift to other departments which are not yet automated if the banks have been able
to use less staff to carry out the functions led either being done by more people. It
means that computerization has been able to be achieved (journal 1991). There is
also destructive fear of fraud or debasement of information. In computerized
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systems, data are stored in distinctive media which may not be available to some
persons but which are available to large extends to system operators (Hoggson,
2007). This means that data files in the hands of the wrong person can be used to
wreak a bank. However, the incomplete nature of computerization at the moment is
capable of preventing such as cheques are provided by the use of manual system just
to monitor the business, if the competitor gains access to the information stored in
the database, he could use it as an advantage. These benefits are thus enumerated
below to justify the use of computer based system in banking operations.

a. Cost Savings: The use of machines that can operate at a much faster rate
that human for labour intensive duties bring for the cost of the banks. A survey
by some banks revealed that due to the slow rate of balancing all the
transactions that took place at the end of the day. Annually, a large amount of
money was paid out as considered of overtime to operating personnel, concept
prevails where all information needed by the bank and are stored centrally in
the computer. The central storage of information is beneficial in that
duplicating of data files is eliminated and subsequently cost relating duplication
of information is eliminated.
b. High Quality and Timely Information: Information to support decision, in
order to plan effective the strategically both financial and competitive the
strength and weakness of these competitors and present quantities that are not
in a really usable form and only a computer.
c. Strengthening the Internal Control System (ICS) of Banks: It is very
worthy to mention that the four major goals of a good internal control system
are:
i. Carry the operations of the business in an orderly and efficient manner.
ii. Ensures adherence to management policies.
iii. Safe-guard the assets of the business
iv. Secure as far as possible the accuracy and competencies of facial records.
A well-designed and implemented computer based system will contribute the
attainment of the above mentioned goals. In developing a computer system
acceptors in operational procedures become very difficult to implement unlike in the
case of manual system standardization the system are forced to become more
discipline as they allow result to be guided by standard procedures (Hoggson, 2007).
In developing countries, computers are the most essential tool in the handing and
processing of information in the area:
1. Keeping track of customers accounts in all the departments of the bank.
2. Keeping or computing of balances arising as a result of deposits or withdrawal.
3. Computing of interest payable to customers oil savings and deposit accounts.
4. Computing of loan and overalls interest.
5. Transferring of fund from one branch of a bank to another branch of the same
bank or from one bank to a different bank

2.5 Societal Implication of Bank Computerization

Whereas we have considered the implication for the organization utilizing at, its use
has implications on society in general. A change in pattern of employment,
computers have displaced some employees in some tasks but the overall effects
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seem to be relative balance as the industry has generated new task that did not
exist.
a. Change in Job Characteristics: Computer come, with standardization and
monitoring, it determines the pace of work and may put pressures on
employees who must match the pace. It provides standard answers and thus
breeds dissatisfaction and demotivation among employees who begins to see
them as mere instrument for running a mechanization system.
b. Human Resistance: Other current issues in computerization are the human
response to it. The importance stems from the facts that a computer based
information system must necessarily be a machine interaction people tend to
prefer systems which they are used to and this manifested in resistance in
change (Hoggson, 2007).