Regulatory Alerts2023-12-20
Methodology for Assessing the Viability and Sustainability of RFIs’ Business Models
The Bank of Ghana has issued an exposure draft establishing a standardized Business Model Analysis framework to evaluate the viability and long-term sustainability of Regulated Financial Institutions' strategies. The methodology requires supervisory examiners to conduct forward-looking quantitative and qualitative assessments, applying metrics such as Return on Equity versus Cost of Equity, Risk-Adjusted Return on Capital, and funding mix alignment to identify profitability drivers, concentration risks, and strategic vulnerabilities. Integrating these evaluations into its Risk Based Approach to Supervision, the regulator will proactively target institutions with weak profitability or solvency challenges, enabling timely supervisory interventions and informed capital restoration decisions.