The Bank of Ghana (BOG) published the Capital Requirements Directive (CRD) under Section 92(1) of the Banks and Specialized Deposit-taking Institutions Act 2016 (the BSDI Act) and under Section 4(d) of the Bank of Ghana Act 2002. CRD shall apply to banks licensed and operating under the BSDI Act. The Directive shall be implemented from July 01, 2018. Banks must comply with the CRD by January 01, 2019.
The CRD consists of four parts: Definition of Regulatory Capital (Part 1), Management and Measurement of Credit Risk with three sub-sections (Part 2), Management and Measurement of Operational Risk (Part 3), and Management and Measurement of Market Risk (Part 4). The CRD sets the requirement by which banks will calculate the capital adequacy ratio (CAR) under the BSDI Act. The risk-based CAR shall be calculated on a standalone and a consolidated basis. CRD requires banks to hold appropriate capital commensurate for unexpected losses that may arise from business through capital transactions, credit, operational, and market risks. Section 29(1) of the BSDI Act mandates the Bank of Ghana (BOG) to prescribe a risk-based capital adequacy requirement, which will be measured as a percentage of the capital of the bank to the risks of its assets.
BOG has power to increase CAR for any bank not operating to minimum risk standards. Any bank operating outside the minimum standards in regard to its risk-based capital requirement, eligible regulatory capital, risk exposures, or operating practices must notify BOG and take immediate action to rectify and strengthen its business within a set time acceptable to BOG and/or be subjected to penalty.
Related Link: Capital Requirements Directive
Effective Date: July 01, 2018
Keywords: Middle East and Africa, Ghana, Banking, CRD, Market Risk, Credit Risk, Operational Risk, Regulatory Capital, BOG
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