The Bank of Ghana has asked rural and community banks (RCBs) to put in place corporate governance and effective risk management best practices that help banks to clearly identify, measure, control and mitigate the risks associated with their operations.

It observed that good corporate governance and risk management systems lie at the heart of any successful business, and further advised rural banks to adopt adequate measures that deal with the associated challenges of operational and credit risks which often come along with their operations.

Head of Other Financial Institutions Supervision, Bank of Ghana, Mr. Raymond Amanfu, made these remarks at the shareholders’ Annual General Meeting (AGM) of Atwima Mponua Rural Bank at Toase.

He said RCBs should give serious consideration to human capital as part of their attempts to grow.

He insisted that RCBs should endeavour to appoint competent and reliable persons of high integrity to manage their institutions, and also deal with issues of unethical banking practices promptly and appropriately.

He indicated that the BoG does not countenance such practices. “We require due diligence be carried out on all prospective RCB staff before they are employed”.

Mr. Amanfu said impacts from the rural banking industry continue to be felt in the economy. He noted that after four decades of operations, the RCB sector has evolved significantly in response to phenomenal challenges posed by changing dynamics in the industry and among other actors.

It is important to note that the total assets of rural and community banks (RCBs) grew from a year-on-year total figure of GH?1.8billion in October 2014 to GH?2.40billion in October 2015, marking a 17.8 percent increase.

This noteworthy performance of RCBs accounted for 3.4 percent of the total assets in a banking industry with GH?70.39billion as at October 2015.

The total assets of RCBs were funded mainly by deposits, 76.22 percent; borrowings and other liabilities, 10.36 percent; and reserves of 9.45 percent.

Notwithstanding the steady performance recorded by the RCB sub-sector, the BoG expressed concern at some major lapses which continue to occur in the operations of RCBs despite several initiatives taken to address them.

It said it will ensure that all licenced institutions operate within the rules and laws governing their operations, and not tolerate any violations of laws -- as offenders will be appropriately sanctioned.

This warning comes with the knowledge that some RCBs have been operating agencies in the urban centres without the BoG’s approval.

The central bank has noted that these agencies are mostly established without due consideration as to the financial and supervisory capabilities of the RCBs, which often leads to misuse of depositors’ funds with attendant effects of flouting prudential requirements.