BoG, Banks Collaborate To Clean Books

The Central Bank has indicated that it's collaborating with the commercial banks operating in the country to help clean their books and deal with the structural challenges that undermine their effective credit delivery process.

According to Dr Ernest Addison, Governor, who was speaking at the 18^th annual luncheon of the Ghana Association of Bankers (GAB), his outfit was enforcing a directive on loan write-off and would require appropriate disclosure of written-off facilities in the published financial statements of banks as part of efforts to reduce the level of impaired assets.

“We are also reviewing the governing legislations on the credit reference system to require banks to submit both positive and adverse information on borrowers to the bureaus through a new portal that has just been developed.

“The BoG is also working on the collateral registry system to address some outstanding issues with foreclosure. We are also supportive of government efforts to enhance clarity in the land acquisition process which transmits into the collateral perfection processes for banks. In addition, we are hopeful that the introduction of the Ghana Reference Rate, Ghana Post GPS and the national identification programme would contribute to the ongoing measures aimed at reducing the incidence of loan defaults.”

Dr Addison averred that BoG's resolve to fight financial crime called for the continuous strengthening of its anti-money laundering/counter financing of terrorism (AML/CFT) regime by increasing the scope of AML risk-based supervision and collaborate with the Financial Intelligent Centre (FIC), Economic and Organized Crime Office (EOCO) and other law enforcement agencies to enforce the (AML/CFT) regulations.

“As we work closely with these agencies, the emerging area of crime that threatens the very existence of financial institutions is cybercrime. Cyber criminals have managed to bypass security controls and to exploit breaches or vulnerabilities within the cyber and information security defenses of financial systems. In this regard, the Central Bank has issued a draft directive on cyber and information security to the banking industry. “We have received comments and provided feedback to the industry on the directive and this would soon be launched and enforced to address the cyber security and related risks in the industry.

He stated further that BoG had issued the final directive of the Capital Requirement Directive (CRD) which addressed Pillar one (1) of Basel II/III capital regime adding it was now at the parallel-run stage in the implementation process as full compliance would be enforced by January 1, 2019.

“We are currently working on requirements under Pillar II of the Basel accord to strengthen the supervisory review process. This would involve the Internal Capital Adequacy Assessment Process (ICAAP) allowing banks to undertake an assessment of the capital commensurate with all their risk exposures.

“We are also driving the disclosure requirements in conformity with pillar III of the Basel accord to enhance appropriate information flow to market participants. The process of fully operationalizing the BSDI Act, 2016 (Act 930), is in progress and we are currently reviewing existing directives and regulations to align them with the Act. In line with this, we have issued draft exposures for comments relating to the “fit and proper” directive, financial holding companies and the mergers and acquisitions directive.”

Dr Addison said the Central Bank, after discussions with industry players, called for the adoption of the accounting standard on financial instruments (IFRS 9) which began January this year. IFRS 9 requires banks to implement the expected credit loss model for the banking industry.

“As we move closer to December, banks are making frantic efforts to comply with the minimum capital requirement. As noted at the July MPC press conference, six (6) banks have already achieved full compliance with the recapitalisation requirement and the rest are at various stages of compliance. The Bank of Ghana is monitoring progress with each bank to ensure the execution of their plans and move towards compliance.”

By Samuel Boadi