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    BOG Revises Risk Management Directive, Proposes Governance Directive

    November 26, 2021

    The Bank of Ghana (BOG) published the revised Risk Management Directive and an exposure draft for the Corporate Governance Disclosure Directive. The Risk Management Directive aims to ensure that regulated financial institutions have the requisite systems to adequately identify, measure, evaluate, control, mitigate, and report material risks that may affect their ability to meet their obligations to depositors and other stakeholders. BOG also published explanatory notes to clarify the important amendments to the Directive as a result of the response to the consultation on the Directive.

    The Directive has been issued pursuant to Section 92(1) of the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930) and shall apply to banks, savings and loans companies, finance houses, and financial holding companies licensed or registered under Act 930. The Directive stipulates that as part of the risk management strategy, in defining the Risk Universe, the Board shall at a minimum consider the extent to which these listed risks shall be addressed: credit risk, market risk, liquidity risk, operational risk, information communication technology (ICT) risk, cyber-security risk, reputational risk, systemic risk, compliance risk, concentration risk, country and transfer risk, and money laundering/financing of terrorism risk (risks as defined by the Basel Committee on Banking Supervision). The key requirements of this directive are that a regulated financial institution shall:

    • Develop and maintain a risk management framework that is appropriate to the size, business mix, and complexity of the institution and relevant at all times
    • Maintain a Board-approved risk appetite statement
    • Maintain a Board-approved risk management strategy that describes the key elements of the risk management framework that give effect to the approach to managing risk
    • Maintain adequate resources to ensure compliance with this directive
    • Notify BOG when it becomes aware of a significant breach of, or material deviation from, the risk management framework; or that the risk management framework does not adequately address a material risk

    The exposure draft of the Corporate Governance Disclosure Directive sets out disclosure requirements for governance structure, remuneration policies, Board meetings, other engagement of Directors, succession planning, ethics and professionalism, related party transactions, and data protection. As per the exposure draft, within 90 days of the beginning of each financial year, the Board shall provide a certification in the annual report as to the compliance of the regulated financial institution or otherwise with the contents of the Directive. The Board shall report any material deficiencies and weaknesses that have been identified in the course of the year, along with action plans and timetables for corrective action by the Board to BOG. The Directive will be issued under the powers conferred by Sections 56 and 92(1) of the Act 930 and shall apply to regulated financial institutions. BOG welcomes comments on all aspects of this exposure draft.

     

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    Keywords: Middle East and Africa, Ghana, Banking, Disclosures, Governance, Basel, Risk Appetite, Risk Management Directive, Corporate Governance Disclosure Directive, BOG

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