Effectiveness of Credit Management Systems in Ghanaian Banks: A Case Study of HFC Bank (Gh.) Ltd and Barclays Bank Ghana Ltd

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The objective of the study was to examine the credit risk management practices of the banks in Ghana using HFC Bank and Barclays Bank as case study. The study also sought to identify the major sources of credit risk exposures and the mitigating measures put in place to manage the exposures and to assess the impact of these exposures on the banks capital adequacy, asset quality, management, earnings and liquidity positions and sensitivity to market risk. The methodology used for the study was the camels’ module. According to the study commercial loans, mortgage loans and consumer loans were found to be the major source of credit risk. Capital adequacy was right as banks kept minimum capital. However, asset quality was questionable as banks had high loan loss ratio. Earning ability was found not adequate in spite of the high interest rate regimes. Liquidity positions amongst the banks were however, found to be high. Finally, it was revealed that, banks in Ghana were more sensitive to asset repricing than liability repricing as a percentage increase in interest rate environment in the short term could impact positively on the interest margins of banks. It was therefore recommended for bank in Ghana to diversify their risk exposures to reduce the risk of concentration. Banks should constantly review and conduct further studies on periodic basis into the management of their credit policies and strategies; and work out plans to determine whether they are in tune with the recommended best practices. Finally, due to the limitations of this study and the extensive nature of credit risk management, it was also recommended that, further studies be conducted to address the deficiencies of this study.
A Thesis submitted to the Institute of Distance Learning, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirements for the degree of Commonwealth Executive Masters in Business Administration, September, 2011