Community Banks Must Be Professionally Run, Prudent With Depositors’ Money- BoG

The Bank of Ghana (BoG) has warned that community ownership will not be an excuse for weak governance or financial indiscipline as it opens the sector to Urban Community Banks.

Governor Dr Johnson Asiama said the central bank will insist on strong risk management, professional management and commercial discipline, even as the new institutions remain locally rooted and inclusive.

“Let me be plain about what Bank of Ghana will and will not accept. Community ownership cannot mean weaker governance. Local knowledge is not a substitute for risk management.

“And social purpose does not excuse financial indiscipline,” Dr Asiama stated on Wednesday at the event to commemorate 50 Years of Rural Banking and the Conversion to Community Banking.

He said the new Community Banks must strike a balance between local focus and sound banking practice.

“These institutions must be locally rooted but professionally managed, inclusive in purpose but prudent in operation, ambitious in reach but careful with other people’s money,” he said. “Their credit decisions remain their own, made commercially, by their own boards. The Bank of Ghana’s part is to make certain the ground they stand on will hold.”

The Governor argued that the reform is also about building a more resilient financial system. According to him, a system dominated by a few large institutions is vulnerable.

“And this matters beyond the communities themselves. A financial system resting on a small number of large institutions is not a resilient one. Depth is not only about size. It is also about spread,” he noted.

Dr Asiama added that the reforms will broaden the range of products Community Banks can offer and allow them to compete more directly. For the strongest institutions, he said, the door is open to eventually grow into national players.

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