The Bank of Ghana has issued final Guidelines on the Management and Measurement of Credit Concentration Risk for banks, savings and loans companies, finance houses and financial holding companies. The framework requires regulated financial institutions to establish governance, measurement, limit-setting and reporting arrangements to identify and control credit concentration risk, and for banks to incorporate credit concentration risk into the Internal Capital Adequacy Assessment Process (ICAAP) and related Pillar II capital assessments. The Guidelines set out board and senior management responsibilities, including board-approved frameworks, annual reviews, management information systems and periodic stress testing. They require enterprise-wide identification and classification of concentrations across single names and connected counterparties, sectors, geographies and credit risk mitigation-related exposures, and also call for consideration of climate-related physical and transition risks and improved information gathering to identify credit contagion via bilateral business links. Measurement approaches include model-free indicators such as the Herfindahl–Hirschman Index, Gini coefficient and concentration ratios, with internal audit expectations around connected-counterparty aggregation and exposure classification, and supervisory review powers that can lead to requirements to reduce concentrations, enhance risk management or hold additional Pillar II capital where estimates or controls are inadequate. The Guidelines take effect on 1 January 2027, with institutions expected to align governance, policies and processes by 31 December 2026. Regulated financial institutions must complete impact assessments and submit results to the Bank of Ghana by 31 July 2026, alongside a board-approved credit concentration risk framework and, for banks, a methodology for estimating Pillar II capital and monitoring credit concentration risk.
Bank of Ghana 2025-09-01
Bank of Ghana issues credit concentration risk management guidelines and sets 1 January 2027 implementation with Pillar II ICAAP expectations for banks
The Bank of Ghana has issued final Guidelines on managing and measuring Credit Concentration Risk for banks and financial institutions. The framework mandates governance, measurement, limit-setting, and reporting arrangements, incorporating it into the Internal Capital Adequacy Assessment Process (ICAAP) and Pillar II assessments. It includes board responsibilities, stress testing, and measurement approaches like the Herfindahl–Hirschman Index, with supervisory powers to enforce risk management enhancements or additional capital requirements.