a) Letter of Comfort vs. Indemnity:

• Letter of Comfort: Non-binding assurance from a parent company or sponsor supporting a borrower’s obligations, often moral rather than legal. Not a guarantee; courts (e.g., Kleinwort Benson v Malaysia Mining) view as intent, not enforceable. In Ghana, used in project finance but offers limited protection under common law, not triggering default.
• Indemnity: Legally binding promise to compensate for loss, primary obligation independent of underlying debt. Enforceable as contract, per Indemnity Act principles; banks prefer for direct recourse. Difference: Comfort letter is weak/soft; indemnity strong/hard, with indemnity surviving principal contract invalidity. Practical in Ghana: Indemnities in guarantees, comforts in intra-group loans to avoid BoG capital charges.

b) When taking assets as security, banks assess to ensure value and enforceability, per BoG’s risk guidelines and Act 1052. Factors include:

• Value and Valuation: Current/future market value via independent appraisal; volatile assets (e.g., stocks) discounted.
• Liquidity: Ease of sale; cash/securities preferred over illiquid property in Ghana’s market.
• Legal Title and Perfection: Clear ownership, registrable (e.g., at Lands Commission); perfection via possession/registration to prioritize claim.
• Enforceability: Jurisdiction-specific; cross-border needs conflict rules compliance, avoiding sovereign immunity.
• Risks (Depreciation/Obsolescence): Assets like machinery depreciate; insurance required.
• Costs: Valuation, registration, enforcement fees; must not exceed benefit.
• Borrower’s Use: Possessory vs. non-possessory (e.g., floating charge allows business continuity).
• Regulatory Compliance: BoG approvals for large exposures; tax implications under Act 896.
• Environmental/Legal Risks: Due diligence for liabilities (e.g., contaminated land).
• Margin Requirements: Loan-to-value ratios per BoG’s CRD for safety.

In practice, post-2019 cleanup, Ghanaian banks like Ecobank emphasize these for NPL reduction.