The deregulation of the Nigerian financial system in 1987 until recently, magnified financial and other forms of risk in the banks' that were hitherto minimal. The systemic risk which has now increased due to the deregulation brought the need to focus more attention on the operations of banks, their risk exposure and ways to eliminate or minimize such risks. It was in the light of such concerns that the Central Bank of Nigeria (CBN) came out with the prudential Guidelines in November, 1990, which is aimed at streamlining banking operation in the country by creating a sound capital base and the application process. This project is written primarily to examine the impact of the implementation of the guidelines on bank's financial risk management. It will also seek to analyze the operation of prudential guidelines. The instrument used by the researcher in collecting information include secondary data - published literature and primary data - questionnaires and interviews to complement the secondary data. The bulk of the data were culled from published materials which were mainly available from CBN Annual report, Annual report of Union Bank and materials from NDIC, write - up by associates of NDIC in journals and magazines and comments by scholars like Prof. Nwankwo. The prudential guidelines were well implemented and as a result of proper implementation and monitoring the activities of commercial Banks by the CBN, some banks who had inadequate capital base found it difficult and even up to date still finding it difficult to operate successfully under the current banking guidelines due to it stringent requirements and hence, such banks condemned the guidelines as an unimaginative invitation of American system and that the guidelines are too stringent for the banks in the country. -While the giant banks like the likes of the case study see it as timely and appropriate measure that returned the sector to the part of profitability and sanity. This is because most of the banks were declaring paper profit before the implementation of the guidelines and during and after the guidelines' implementation, many banks declared loss. Although the problem of capital inadequacy and the attendant risk remained, the guideline has created an increased awareness of the risk by both operators and supervisors. The guidelines also made banks to classify their loans as performing and non-performing by reducing their risk of in coming bad debts.