The Bank of Ghana (BoG) Governor, Dr. Johnson P. Asiama, has urged banks to strike a balance between prudence and support despite a tightening monetary environment. The Governor’s appeal was made in an address to commercial banks’ chief executives during the BoG’s first post-Monetary Policy Committee (MPC) meeting under his leadership.
A tightening monetary environment
The session followed MPC’s decision to increase the policy rate by 100 basis points to 28 percent, aimed at accelerating a disinflation process that remains sluggish. While acknowledging that the policy rate hike could heighten borrowing costs and constrain business activity, Dr. Asiama stressed the importance of striking a balance between prudence and support.
- He called on banks to moderate the pace of interest rate adjustments and sustain credit flow to viable enterprises
- He emphasized the need for transparent communication with clients and innovative lending solutions that protect credit access without undermining asset quality
The Governor’s remarks were delivered against a backdrop of ongoing reforms in the financial sector, which continues to recover from two major disruptions – the banking sector clean-up and Domestic Debt Exchange Programme (DDEP).
Reforms in the financial sector
While commending banks for their resilience and professionalism through these challenges, Dr. Asiama admitted that aspects of both interventions could have benefitted from better foresight and consultation. “We cannot change the past, but we can learn from it,” he noted, urging a new chapter of collaboration between banks and regulators to rebuild public confidence and drive inclusive economic growth.
Key reforms
- Enhanced supervisory capabilities
- Strengthening internal controls and cyber resilience
- Full compliance with anti-money laundering (AML) and counter-terrorist financing standards
The Governor further stressed the importance of full compliance with anti-money laundering (AML) and counter-terrorist financing standards.
Non-performing loans and risk management
Dr. Asiama also encouraged traditional banks to respond with greater innovation and agility, while reaffirming the BoG’s commitment to creating a level playing field that balances innovation with consumer protection. “Digital transformation must be pursued with discipline,” he warned, noting that operational and cyber risks have intensified. A recent BoG report revealed a 5 percent increase in fraud incidents and 13 percent rise in value at risk, reinforcing the need for banks to strengthen internal controls and cyber resilience.
- Gross NPL ratio at 22.57 percent, largely due to legacy exposures
- Non-performing loans (NPLs) remain elevated, even after adjusting for fully provisioned loans
Enhanced supervision and risk management
The Governor emphasized a shift from reactive enforcement to forward-looking supervision, with priorities including risk-based analytics, sustainability assessments and enhanced governance.
Priorities for forward-looking supervision
- Risk-based analytics
- Sustainability assessments
- Enhanced governance
BoG is engaging these institutions to address capital shortfalls, ensure compliance with prudential standards and restore depositor trust. Additionally, non-performing loans (NPLs) remain elevated, even after adjusting for fully provisioned loans.
- Non-performing loans (NPLs) remain elevated
- BoG is engaging domestically controlled and state-owned banks to address capital shortfalls
BoG’s commitment to sustainable banking
Dr. Asiama further stressed the importance of sustainable banking, describing it as essential to Ghana’s long-term economic trajectory. “Sustainable banking requires strong governance at the core,” he stated, emphasizing the need for ethical and inclusive banking practices.
Key principles for sustainable banking
- Strong governance at the core
- Ethical and inclusive banking practices
BoG is committed to its six policy priorities – including exchange rate stability, inflation control, financial inclusion and crisis preparedness – and calls on banks to partner with the central bank in delivering a resilient, inclusive and future-ready financial system.
Conclusion
Dr. Asiama reaffirmed BoG’s commitment to its six policy priorities and called on banks to partner with the central bank in delivering a resilient, inclusive and future-ready financial system. “Financial institutions like yours are essential to Ghana’s economic growth,” he said. “Together, we must rebuild confidence and position the sector to support inclusive growth,” he added.
Highlights
• The Bank of Ghana (BoG) Governor, Dr. • The Governor emphasized the need for transparent communication with clients and innovative lending solutions that protect credit access without undermining asset quality. • The BoG is enhancing its supervisory capabilities to improve crisis preparedness and risk management. • Banks are encouraged to respond with greater innovation and agility, while reaffirming the BoG’s commitment to creating a level playing field that balances innovation with consumer protection. • The BoG is engaging domestically controlled and state-owned banks to address capital shortfalls and ensure compliance with prudential standards. • Sustainable banking is emphasized as essential to Ghana’s long-term economic trajectory.
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