BoG moves to the rescue of banks

All banks in the country have been directed by the Bank of Ghana (BoG) to strictly comply with recommendations from a recent Asset Quality Review (AQR) exercise conducted by the Bank.

The findings from the AQR which have been dispatched to all banks pointed out specific risk exposure of all banks and measures that must be employed to minimize their effect on the financial sector.

Speaking at the 10th Anniversary Ball of Fidelity bank in Accra, the Second Deputy Governor of the Bank of Ghana, Dr Johnson Asiama disclosed that 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.

“The Bank of Ghana prescribed remedial measures both general and specific to the risk exposure of each bank to help consolidate the existing resilience of the industry and restore the affected banks,” he explained.

“We have subsequently issued Supervisory Letters to this effect, with strict timelines for compliance by all. Banks are thus required to reclassify all downgraded facilities and book the appropriate provisions,” he added.

Dr. Asiama took the opportunity to remind banks that went beyond their single obligor limits to provide plans of restoring their capital adequacy level.

“Banks which suffered capital erosion leading to breaches insolvency and single obligor limits, 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,” he stressed.

Touching on the credit infrastructure development of banks, Dr. Asiama pointed out that the central bank is working in consultation with the Ghana Association of Bankers, to review the existing Base Rate model.

“As you will recall, the idea behind the model was to bring transparency to base rate setting and hence 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 has completed its work, and hence a draft notice would be issued soon for implementation,” he said.

He added that another key effort is underway to increase the effectiveness of the Collateral Registry and the Credit Reference Bureaux.

“In this direction, the Bank of Ghana is developing a central Data Hub for use by data providers to ease their data submission to credit bureaus. Also, proposed amendments to the Borrowers and Lenders Act, Act 773 have 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,” he announced.

“It is our hope that the availability of information on the credit history of borrowers will have a positive impact on the pricing of credit products across the financial sector. These developments will further deepen financial inclusion in the country,” he said.