BoG moves to de-risk rural and community banks

The central bank has issued guidelines for Rural and Community Banks (RCBs), focused on de-risking that sector of the banking system.

According to bank, the guidelines, issued last week, have been designed to provide a framework within which regulated RCBs will establish and embed a culture of risk management in their institutions.

Additionally, they will ensure that RCBs have a structured approach to risk management that meets the minimum standards.

“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 bank said.

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

Further expectations of the risk management guidelines are that the provisions will contribute to the creation of a culture of risk awareness in the RCBs, and strengthen methodologies for risk identification, measurement, mitigation, monitoring, and reporting.

RCBs are required to use the guidelines for the formulation of RCB-specific risk management systems that will meet their unique needs.

The central bank, under its corporate governance directive for RCBs also issued last week, requires all RCBs to adopt sound corporate governance principles and best practices to enable them undertake their licensed business sustainably.

Source:Business24