BoG urges RCBs to pay attention to good corporate governance

The Bank of Ghana has asked rural and community banks (RCBs) to put in place corporate governance and effective risk management best practices that would help banks to clearly identify, measure, control and mitigate the risks associated with their operations.

It observed that good corporate governance and risk management systems lie in the heart of any successful business, and further advised that RCBs adopt adequate measures to deal with the challenges of operational and credit risks often associated which come along with their operations.

Head of Other Financial Institutions Supervision, Bank of Ghana, Mr. Raymond Amanfu, made these remarks at the Annual General Meeting (AGM) of the shareholders Atwima Mponua Rural Bank, at Toase.

He said RCBs should give serious consideration to human capital as part of their attempts to grow their banks.

He insisted that RCBs should endeavor to appoint competent and reliable persons of high integrity to manage their institutions, and also deal with the issues of unethical banking practices promptly and appropriately.

He indicated that the BoG does not countenance such practices. “We require due diligence be carried out on all prospective RCB staff before they are employed.”

Mr. Amanful said impact of the rural banking industry continues to be felt in the economy. He noted that after four decades of their operations, RCBs, the sector has revolved significantly to respond to phenomenal challenges posed by the changing dynamics of the industry among other actors.

It is important to note that the total assets of rural and community banks (RCBs) grew from a year-on-year total figure of GH₵1.8 billion in October, 2014, to GH₵2.40 billion in October, 2015, marking a 17.8 percent increase.

This noteworthy performance of RCBs accounted for 3.4 percent of the total assets of the banking industry of GH₵70.39 billion in October 2015.

The total assets of RCBs were funded mainly by deposits, 76.22 percent, borrowings and other liabilities, 10.36 percent, and reserves 9.45 percent.

Notwithstanding the steady performance recorded by the RCB sub sector, the BoG expressed concern of some major lapses that continue to occur in the operations of RCBs despite several initiatives taken to address them.

It said it will ensure that all licensed institutions operates within the rules and laws governing their operations, and not tolerate any violations of laws as offenders would be appropriately sanctioned.   

This warning comes at the back of the knowledge that some RCBs have been operating agencies in the urban centers without the BoG’s approval.

The Central Bank noted that these agencies are mostly established without due consideration of the financial and supervisory capabilities of the RCBs which often leads to use of depositors’ funds with its attendant effects of flouting prudential requirements.