The Financial institution of Ghana has urged monetary establishments to take care of a Sturdy Credit score Danger Administration Framework to assist scale back Non-Performing Loans (NPLs).
In a discover to banks, Specialised Deposit-Taking Establishments, non-banking monetary establishments and the general public, the central financial institution stated a Regulated Monetary Establishments (RFI) shall, on a steady foundation, improve its credit score threat administration perform and processes in compliance with the Financial institution of Ghana’s credit score threat administration necessities and shall exhibit the robustness of such processes to the Financial institution of Ghana.
“The Board of an RFI shall have general duty for approving and periodically, not less than yearly, reviewing the credit score threat administration technique and insurance policies of the RFI. As well as, an RFI shall, amongst others, have in place”, it added.
By way of observing the prudential restrict on NPLs, the Financial institution of Ghana stated RFIs shall make sure that the extent of NPLs to gross loans (NPL ratio) doesn’t exceed 10.0%, or such different ranges as could also be prescribed by the BOG once in a while.
Nevertheless, microfinance Establishments are required to adjust to their present prudential NPL ratio restrict of 5%.
It added that the Board-approved NPL discount plan shall be geared toward returning the RFI to full compliance inside one yr.
It continued that RFIs with NPL ratios exceeding the prudential restrict shall, from 1st January 2027, be restricted from the fee of dividends and bonuses, in addition to rising their mortgage portfolio lending to associated events and sectors of the RFI’s credit score portfolio with NPL ratios above the prudential restrict and many others., aside from cash-backed services.
For restructuring NPLs to qualifying debtors, it stated RFIs could provoke the restructuring of a mortgage facility and shall focus on sustainable fee choices with debtors or restructure a mortgage on the borrower’s request to boost the affordability and sustainability of mortgage reimbursement by qualifying debtors. This goals to minimise the potential losses to the RFI as a consequence of default or deterioration in debtors’ creditworthiness.
To take care of the integrity of RFIs’ monetary statements, it urged RFIs to make sure that the restructured loans are appropriately categorised and handled in accordance with the necessities of IFRS 9 impairment and BOG’s prudential mortgage classification and provisioning norms.
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