Assessment of the Credit Risk Management Practices of Stanbic Bank Ghana Limited

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The flow of credit in global financial markets has slowed from a glacial pace to a virtual standstill and credit markets threaten to stay that way despite immense amounts of cash being pumped in by governments and central banks around the world. Controlling risk is a delicate business. Too much credit exposure can lead to high default rates and charge- off percentages; too little exposure often means lost business and revenue. The 2006 annual banking survey report by KPMG showed deteriorating levels in the asset quality of certain financial institutions in the country and Stanbic was not an exception. With asset quality rate of 15.3% against the backdrop of an industiy average of 11.25%, the need for a thorough assessment of the credit risk policies cannot be overlooked. The purpose of the study was to improve understanding of credit risk and assess its impact on the overall lending policies of the bank and profitability. And also to provide a platform for appreciating the role of the credit department within the bank Descriptive survey methodology was used with extensive consultation of documentations * by other researcher, the bank's books and discussions with other key stakeholders of the bank. The findings of the study showed that even though the bank has a well structured and organised credit department, weak monitoring of the bank's books; bureaucracy; ineffective staff with poor assessment of credit applications; conflict of interest on the part of relationship officers and some staff of higher position results in a customer who may not be duly qualified for credit facility but as a result of 'whom you know' and ulterior motive of staff, may be granted the assistance which finally result in difficulty in retrieval. The study recommended the removal of an account from the Lock Up category; writing off irrecoverable debts; quarterly review of NPL book by Country Head of Credit; risk monitoring; Credit Motivation; and Offers of Compromise to defaulting but reliable customers of the bank. It is hoped that the adoption mid implementation of the recommendations of this study would help improve the existing situation of the bank.
A Thesis Submitted to The School of Graduate Studies of t he Kwame Nkrumah University of Sciences and Technology in Partial Fulfilment of the Requirement for the Award of Master of Business Administration, 2009