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Over the last few years, the Bank of Ghana (BoG) has cracked the whip at the banking industry in a bid to

restore sanity in the industry. In August 2017, the UT and Capital Banks were liquidated for failing to meet the

BoGs minimum capital ratio. The operations of UniBank, Royal Bank, Beige Bank, Sovereign Bank, and

Construction Bank ended. In their place the BoG announced a new bank called the Consolidated Bank, as part

of measures to ensure the banking sector becomes robust.. Asset Quality Review (AQR) of banks conducted in

2015 and 2016 by Bank of Ghana found that some indigenous banks had inadequate capital, high levels of non

performing loans, and weak corporate governance which compelled BoG to crack the whip.

a) Critically assess the causes of the credit risks in the books of the Banks 8 marks

b) To what extent do you agree that the primary cause of bank failure is credit risk? 12 marks