The Bank of Ghana has reviewed its corporate governance and risk management guidelines for Rural and Community Banks (RCBs).

This is coming after the cleanup of the financial sector that ended in 2019.

The review by the Bank of Ghana is to ensure a safe, sound and healthy RCBs that is central to financial intermediation in the rural and community areas.

The objectives of the corporate governance directive are to compel RCBs to adopt sound corporate governance principles and best practices to enable them undertake their licensed business in a sustainable manner, as well as protect the interest of depositors, among others.

The directive will also ensure that the strategy and objectives of RCBs are set, whilst their risk appetite and day-to-day business operations are well structured.

One critical point in the directive is the intervention of the Bank of Ghana in appointments. In this regard, the proposed director elected at the Annual General Meeting or appointed at a Board Meeting shall not take up the office of Director on the Board unless a prior written approval has been granted by the Bank of Ghana.

Also, an RCB shall notify the Bank of Ghana of the changes in its directors and key management personnel as soon as the changes occur and obtain prior written approval from the Bank of Ghana before assumption of duty.

Sound corporate governance standards

Shareholding in RCBs shall be restricted to only Ghanaians.

The shareholding limits shall apply to a shareholding by any natural person and shall not exceed 30% of total shares.

Family or related party ownership shall also not exceed forty percent 40% of total shares, whilst community participation in ownership shall not be less than 20% of total shares.

The Bank of Ghana may review the shareholding limits from time to time or as and when it deems fit.

Board charter

The Board shall operate under a Board Charter which outlines the appropriate governance practices for its own work and have in place the means to ensure such practices are followed and periodically reviewed for improvement.

The Board Charter shall define the authority of the Board and set out the following minimum standards including overall board responsibility, code of ethics for directors and the structure of the board which clearly articulate its composition and functional arrangements.

For the risk management guidelines, it has been designed to provide a framework within which regulated rural banks will establish and embed a culture of risk management in their respective institutions.

It will also ensure, among other things that Rural and Community Banks have a structured approach to risk management that meets the minimum standards expected of them. This will help minimize credit exposure and operational risk.

The guidelines set out the minimum standard provisions on policies and procedures that would have to be covered in the various policies and procedures manuals used by the RCBs.

The guidelines will also provide RCBs with the needed guidance to protect their institutions from losses, protect and attract capital, instil confidence in the regulator and other stakeholders through the adoption of measures that promote stability in rural banks and the wider financial sector