Question

(b) Discuss Assets and Liabilities Management in the context of Ghana.

(c) Differentiate between Credit risk and Operational risk, as risks factors faced by Commercial banks. (2marks)

(d) Outline four (4) ways by which credit risk could be managed in Ghana

[Total: 20 marks]

Answer 1

(b) Discuss Assets and Liabilities Management in the context of Ghana.

Assets and Management Liability in the context of Ghana:

• Asset and Liability Management is the process in which institution manages and regulate their financial position statement in such as way to allow for alternative interest rate and liquidity scenarios.
• If aseet-liability management is done properly, it could control various inherent risks such as credit risks, interest risks and liquidity risks.
• It is, therefore, an essential approach for banks, financial institiutions, insurance companies and finance companies etc. which have to facefinacial ratios of different kinds.
• Asset- Liability management not only helps in formalization of understanding but also quantify these risks that leads to higher returns and profitability.

(c) Differentiate between Credit risk and Operational risk, as risks factors faced by Commercial banks.

Basis of difference	Credit Risk	Operational Risk
Meaning	Credit Risk is the risk that causes when the loan borrowers or counter parties of banks do not able to meet contractual obligations.	It is also a big risk that banks face. It is the risk of loss that causes due to interruptions, errors pf damages in the systems or processes or by people.
Example	A borrower is unable to pay the principal amount or interest for the loan.	Any teller gives extra bill of $100 to the customer.

Four ways in which Credit Risk could be managed in Ghana are:

1. Application appraisal processes
2. Ascertaining the adequacy of loan monitoring mechanism
3. Questionnaire technique
4. Random Sampling Technique

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