BoG directs banks to plug loopholes

The Bank of Ghana (BoG) says it has prescribed remedial measures both general and specific to the risk exposure of each of the 31 commercial banks operating in the country to help ensure resilience of the industry and restore the affected banks.

This follows the recent conclusion of its Asset Quality Review (AQR) exercise.

Johnson P. Asiama, Second Deputy Governor of the Bank, disclosed this in a speech delivered at the 10th Anniversary Ball of Fidelity Bank on Friday, April 28, 2017 at Movenpick Hotel.

“We have subsequently issued supervisory letters to this effect, with strict timelines for compliance by all. The AQR exercise highlighted impairment in banks’ loan books, capital deficiencies, credit concentration in the energy sector and some latent vulnerability in the banking industry.”

He indicated that banks were required to reclassify all their downgraded facilities and book their appropriate provisions.

“For banks which suffered capital erosion leading to breaches in solvency and single obligor limits, they are required to furnish the Bank of Ghana with an acceptable capital plan that would restore them to the prescribed capital adequacy benchmark and/or plans to wean them off exposure limit breaches.”

Base rate model

To enhance credit infrastructure further, Dr Asiama said the Central Bank has been working in consultation with the Ghana Association of Bankers to review the existing Base Rate model, noting that the idea behind the model was to bring transparency to base rate setting and lending rates in the economy; and also to promote uniformity in the definition of determinants of the Base Rate in the industry generally.

The Committee, he added, had completed its work, and a draft notice was expected to be issued soon for implementation.

Collateral registry

Another key effort, he announced, was underway to increase the effectiveness of the Collateral Registry and the Credit Reference Bureaux, noting that the Bank of Ghana was developing a central data hub for use by data providers to ease their data submission to credit bureaus.

Amendments

Furthermore, he said proposed amendments to the Borrowers and Lenders Act, Act 773 had been drafted with the aim of strengthening the Secured Transaction Regime in the creation, perfection, priority and enforcement of security interests on both movable and immovable property.

Payments systems

“In response to the changing banking and payment landscape, we initiated a process to review the Electronic Money Issuers and Agents’ Guidelines (2015) and the Payment Systems Act 2003 (Act 662) with the view to consolidating it into one piece of legislation called Payment Systems and Services Bill, 2017.

“We have consulted widely with stakeholders in drafting the bill, and the draft is currently with the Ministry of Finance ready to be forwarded to Cabinet.

“We are also working with the banking industry to migrate all payment cards from magnetic stripe standard to Europay, MasterCard and Visa (EMV) chip and PIN standard this year to enhance security and reduce fraud in the industry.”

These are aimed at reducing electronic payroll fraud and improving government revenue collection efforts, as well as enhancing the monetary policy transmission mechanism.

Directive

“We therefore enjoin all financial institutions and payment systems operators to obtain international security certifications such as the ISO 27001 and the PCI DSS. These requirements are necessary to promote the integrity of the financial and payment systems.

Fidelity at a glance

Jim Reynolds Baiden, Managing Director of Fidelity Bank, commenting on the performance of his outfit, said the bank’s total assets steadily increased at end-March 2017 to GH¢4.10 billion, up by 4.71 percent from the corresponding period last year.

The bank has also grown its deposits base to GH¢2.58 billion and has extended credit to the tune of about GH¢1.47 billion.

“Fidelity Bank Limited has invested in more than 115 ATMs and operates 75 branch networks with presence in eight out of the 10 regions of the country. Today, Fidelity Bank can boast of establishing two subsidiaries, the Fidelity Asia Bank Limited, its offshore banking hub and the Fidelity Securities Limited, the investment banking arm.”