Large exposures directive for banks, others issued by BoG

The Bank of Ghana has introduced the Large Exposures Directive targeting Banks, Savings and Loans institutions, Finance Houses, and Financial Holding Companies.

The directive aims to mitigate risks by limiting the maximum loss Regulated Financial Institutions (RFIs) could face if a counterparty or a connected group of counterparties suddenly defaults. This measure is designed to safeguard RFIs' solvency. Additionally, the directive seeks to clarify regulatory requirements, eliminating any ambiguities in the interpretation of financial exposure limits.

Under Section 92(2)(a) of Act 930, the Bank of Ghana is empowered to establish directives concerning lending limits for credits extended to insiders and restrictions on loans or credit facilities granted to individual borrowers. Similarly, Section 77(1) of Act 930 authorizes the Bank of Ghana to impose stricter prudential limits for banks, specialized deposit-taking institutions, or financial holding companies as needed, depending on the circumstances.

The directive is set to take effect on January 1, 2026.

RFIs are required to perform impact assessments before this implementation date. If an institution identifies areas of non-compliance, it must submit a credible, Board-approved compliance plan to the Bank of Ghana by June 30, 2025. This plan must outline strategies to achieve full compliance within a timeframe that does not exceed six months from the submission deadline.

The directive applies to all RFIs’ exposures to single counterparties or connected counterparties, regardless of their financial performance or the quality of collateral pledged.