a). Events of Default clauses in facility letters and term loan agreements define specific occurrences that allow the lender to accelerate repayment, terminate the facility, or enforce security. These clauses protect the lender’s interests by providing clear triggers for remedial action. In Ghanaian practice, they are tailored to comply with Act 930 and BoG directives, drawing from international standards like those in syndicated loans.

Five occurrences that constitute Events of Default include:

1. Non-Payment: Failure to pay principal, interest, fees, or other amounts when due. This is the most straightforward default, often with a grace period of 3-7 days for payments. For example, if a corporate borrower misses an installment on a term loan, the lender can declare default, as seen in cases during Ghana’s 2022 DDEP where liquidity issues triggered such clauses.
2. Breach of Covenants: Violation of affirmative or negative covenants, such as failing to maintain financial ratios (e.g., debt service coverage ratio below 1.2x) or engaging in prohibited actions like incurring additional debt without consent. This ensures the borrower’s financial health; breaches can lead to cross-defaults across facilities.
3. Misrepresentation: Any false or misleading statement in the loan documentation or during the facility term, such as inaccurate financial statements. Under Ghanaian law, this aligns with fraud provisions in contracts, allowing lenders like Stanbic Bank Ghana to terminate facilities if discovered post-disbursement.
4. Insolvency or Bankruptcy: The borrower becoming insolvent, entering liquidation, or having receivers appointed. This includes events like filing for bankruptcy under the Insolvency Act, 2006 (Act 708). In practice, during the 2017-2019 banking cleanup, such events triggered defaults in interbank lending.
5. Cross-Default: Default under any other indebtedness exceeding a threshold (e.g., GHS 100,000), causing a ripple effect. This protects lenders from systemic risks, as a default with one creditor signals broader issues.

b). Section 21(1) of the Credit Reporting Act, 2007 (Act 726) outlines the obligations of licensed credit bureaus to ensure accurate, confidential, and efficient credit information management, supporting Ghana’s financial system stability under BoG oversight.

Five duties include:

1. Collect and Collate Credit Information: Gather and organize data on borrowers’ credit history from data providers like banks and microfinance institutions.
2. Provide Credit Reports: Issue credit reports to authorized users (e.g., lenders) upon request, facilitating informed lending decisions.
3. Correct Inaccuracies: Update or amend credit information upon verification of errors reported by data subjects or providers.
4. Maintain Confidentiality: Protect the privacy of credit information, disclosing it only for permitted purposes under the Act.
5. Use Information for Permitted Purposes: Ensure credit data is used solely for credit assessment, risk management, or other lawful activities, preventing misuse.

These duties enhance credit access and reduce non-performing loans, as evidenced by bureaus like XDS Data Ghana contributing to lower NPL ratios post-2019.

c). The choice of law in international banking contracts determines the governing legal framework, influencing enforceability and dispute resolution. Factors are guided by principles in the Rome Convention and Ghanaian private international law.

Five factors include:

1. Parties’ Express Choice: The parties’ explicit selection in the contract, often favoring stable jurisdictions like English law for its predictability in Eurobond issuances involving Ghanaian entities.
2. Location of Performance: Where the contract is performed, such as the borrower’s domicile or payment location; for Ghanaian exporters, this might favor Ghanaian law to align with local regulations.
3. Connection to the Transaction: The closest connection, including the parties’ residences or asset locations; in cross-border loans, English law is chosen if the lender is UK-based.
4. Enforceability and Public Policy: Selection of a law that ensures enforceability without violating public policy, avoiding jurisdictions with exchange controls that could hinder repayments.
5. Market Practice and Precedents: Industry standards, such as using New York law for syndicated loans due to its sophistication in handling complex clauses like events of default.

In Ghana, BoG approvals for international facilities often require consideration of these to mitigate sovereign risks.