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BoG adds limited Asset Quality Review for bank loan assessment

The Bank of Ghana has introduced a limited Asset Quality Review (AQR) into its 2023 supervisory program. This special assessment is conducted to evaluate the condition of banks’ loan and investment portfolios, ensuring compliance with asset classification norms and International Financial Reporting Standards.

During the 60th Anniversary Launch of the Chartered Institute of Bankers, Dr. Ernest Addison, the Governor of the Bank of Ghana, explained that this initiative is part of a broader strategy aimed at bolstering risk management and enhancing the stability of the banking industry.

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In addition to implementing Pillar 1 of the Basel II/III framework in 2018, the Central Bank intends to advance its regulatory reform agenda by collaborating with the Ghana Association of Banks to roll out Pillar 2 of the Basel II/III capital framework. This framework ensures that banks maintain sufficient capital to mitigate all significant risks inherent in their operations.

Dr. Addison mentioned that regulatory guidance will be provided in various aspects of Pillar 2, including Liquidity Risk Management, Internal Capital Adequacy Assessment Process, Supervisory Intervention Guidelines, Concentration Risk, and Interest Rate Risk in the Banking Book.

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Furthermore, the Governor announced the successful completion of industry training on all seven Ghana Sustainable Banking Principles. This training, encompassing Principles 1 and 2 in 2020 and 2022, respectively, concluded in July 2023 with Principles 3-7. The attendees included Chief Risk Officers, Chief Compliance Officers, and Sustainability Officers from various banks.

Dr. Addison anticipates that this training will lead to enhanced industry reporting on these principles. The Ghana Sustainable Banking Principles and Sector Guidance Notes aim to incorporate environmental considerations, social inclusion, and good governance into banks’ lending decisions. This initiative serves as a guide for banks to integrate sustainability into their business operations, ultimately fostering growth and increased returns.

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