Accra, Ghana, November 25, 2019//-Bank of Ghana (BoG) today announced that it would scrutinize compensation policies for Chief Executive Officers (CEOs) and key management personnel as well as Board of Directors of universal banks operating in the country.
To this end, the BoG is expected to meet members of the Ghana Association of Banks on Wednesday to discuss the matter.
The Governor of BoG, Dr Ernest Addison who disclosed this, explained that the move is to ensure transparency in the banking sector.
The banks will also be required to publish Value Added Statements disclosing details of the compensation packages of key management personnel and Boards of Directors separately from total employee compensation, he added.
This follows the recapitalization of banks, a rebound and gradual pick-up in credit extension by banks is taking place.
To give impetus to stronger credit growth and facilitate the deepening of financial intermediation, the Monetary Policy Committee (MPC) sought to better understand the factors that limit access to credit, inhibit the monetary policy transmission process and the reasons for the high lending rates of universal banks.
These factors have over the years acted to limit access to credit, kept cost of credit high to households and businesses, and posed challenges to the attainment of higher economic growth.
Data presented to the Committee revealed that factors such as high operating costs of banks stemming from operational inefficiencies, inadequate disclosures of the risk premium factors in the cost of credit determination, the existence of high NPLs and government’s appetite for domestic borrowing would have to be addressed comprehensively to help lower lending rates and improve on the transmission of policy changes to the real economy in support of higher and robust economic activity.
Furthermore, the Bank of Ghana will be working closely with banks to ensure that banks do not pass on their operational inefficiencies and overhead costs to their clients.
To do this, steps will be taken to align compensation with overall bank performance by linking it to clear parameters including the quality of a bank’s assets, the governor said.
He was quick to add: “To further deepen transparency in the determination of lending rates, banks will be required to develop and publish a clear framework on the risk premium build-up that impacts on an individual borrowers’ credit profiles.
This is expected to provide borrowers with a more-informed basis for negotiating lending rates with their banks, and enhance transparency in the credit delivery process as well as promote responsible credit behaviour from borrowers”
African Eye Report.
