Assesment of credit risk management of Agricultural Development Bank

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AUGUST, 2015
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The recent global financial crises should make everyone concerned about recent significant levels of bad debts on the books of banks in the Ghanaian financial sector. It calls for thorough assessment of the structure and components of the credit risk management frameworks and practices of banks by regulators, analysts and financial watchers from time to time, to ascertain the adequacy of the systems, policies and procedures for managing credit risk as well as conformity to current best practices. As a contribution to this exercise, this study is focused on Agricultural Development Bank (ADB) with the aim of evaluating the bank’s credit risk profile as well as assessing its credit risk management frameworks to ascertain the soundness and conformity to international best practises. Due to the aims and objectives of this research, the research design that was adopted for the study was the descriptive survey method. The study applied analytical tools such as ratios and tables to the bank’s 2013 financial statements, and those of 2012 and 2011 serving as references for comparison. The study revealed that more than fifty percent (50%) of ADB total maximum credit exposure is derived from loans and advances. However, the high level of loan portfolio concentration to few large corporate clients was the weak point in the bank’s credit risk condition. The bank’s asset quality as well as their capacity to absorb credit losses had not improved. The study also revealed that ADB has adequate risk management structures to ensure sound management of credit risk as put forward by the Basel Committee for Banking Supervision.
A thesis submitted to the Knust School of business, department of Accounting and Finance, Kwame Nkrumah University of Science and Technology, Kumasi, in partial fulfillment for the award of Master of Business Administration (Finance) degree.