KIGALI, (The Southern African Times) – In the face of growing credit uncertainty among local banks, the Rwanda Central Bank is increasing supervisory oversight over local banks.
This is they say is aimed at ensuring prudent assessment of borrowers that are unlikely to pay, assessment of Business Continuity Management as well as accurate provisioning to avoid effects that could destabilize the financial sector.
The Central Bank’s Financial Stability Committee meeting on Thursday last week recommended an assessment of the Business Continuity Management in all supervised financial institutions, to understand their ability to deliver critical operations through disruption.
This comes at a time when the local finance institutions are experiencing increased credit risk as the pandemic has weakened the capacity of borrowers to service their loans, thus raising risks of default.
According to The New Times, the business continuity assessment will entail multiple aspects including banks’ governance, risk management framework, planning, incident management and dependency management among others.
Peace Uwase, the Director-General of the Financial Stability at the Central Bank, told The New Times that the assessment will, among other aspects, assess whether existing Business Continuity Plans have been updated given the COVID-19 experience.
Banks that are found with gaps will be required to submit remedial plans to close any gaps identified.
Under governance, the assessment will consider the boards’ role in oversight of operational resilience and business continuity under metrics such as defined bank’s risk appetite, capacity and profile.
The governance structures will also be evaluated on scenarios that they considered in formulating the last bank’s risk tolerance for disruption to its critical operations.