BoG initiates framework for enhanced supervision of banks’ business models
The Bank of Ghana has commenced the development of a Business Model and Viability Analysis Framework to enhance its supervisory practices for assessing the sustainability of banks’ business models.
This is according to the Governor of the Central Bank, Dr Ernest Addison.
Making the disclosure at the launch of the 60th Anniversary Celebration of the Chartered Institute of Bankers (CIB), the Governor noted that the Business Model and Viability Analysis Framework will allow supervisors to identify banks’ vulnerabilities at an early stage and ensure safety and soundness.
In addition to that, the Governor also noted that the BoG has incorporated a limited Asset Quality Review in its supervisory programme for 2023.
The review exercise he noted, is being conducted by the Bank to assess the health of banks’ loan and investment portfolios to determine whether their asset classifications are in line with the required classification norms as well as International Financial Reporting Standards.
In a related development, the Bank of Ghana (BoG) according to Dr Ernest Addison, is working on issuing a Climate-related Financial Risk Directive to provide guidance on addressing climate risk and related issues in the banking industry.
This is because, the issue of climate risk he asserts, is increasingly becoming a material risk, especially for institutions exposed to vulnerable sectors of the economy.
According to him, initiatives contained in the Directive will aim at building a robust financial system.
Climate-related financial risks have the potential to affect the safety and soundness of banks through physical and transition risks, which affect various sectors of the economy and may affect access to financial services and fair treatment of customers.
The Directive, as mentioned by the Governor, will undoubtedly ensure that banks understand their climate-related financial risks and develop risk management frameworks and capabilities to identify, measure, monitor, and control those risks.
