Banks facing heightened credit risk amid pandemic – 2nd Dep. Governor
Second Deputy Governor of the Bank of Ghana [BoG], Elsie Awadzi-Addo, has said banks in Ghana as well as the entire African region are faced with heightened credit risk amid the continuing adverse impact of the Covid-19 pandemic.
According to the Second Deputy Governor of the BoG, the heightened credit risk faced by the banking sector is depicted by the rising of non-performing loan ratios.
“As the pandemic rages on, banks face heightened credit risk as depicted in rising nonperforming loan ratios and this is of great concern to banks, supervisors, and macroeconomic policy makers.
“What is more, the full extent of banks’ credit risk cannot be assessed with any high degree of certainty given the uncertain economic outlook in the midst of the pandemic and the fact that many reliefs granted by banks to borrowers at the onset of the pandemic remain in force,” she remarked delivering the opening remarks at the Bank of Ghana/Bank of England [BoE] Regional training for 16 Central African Banks.
Speaking further on the topic of credit risk, Mrs Awadzi-Addo averred factors accounting for high credit risks faced by banks in Ghana and Africa include poor credit underwriting standards by some banks, weak credit market infrastructure, among others.
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“A number of factors account for high credit risk faced by banks in Africa. These include poor credit underwriting standards by some banks, weak credit market infrastructure such as credit reporting systems, challenges in loan enforcement in the face of defaults, and macroeconomic challenges that impact the real sector, among others,” she noted.
Touching on the regional training by the BoE, Mrs Awadzi-Addo posited the regional training support efforts to strengthen cross-border supervisory cooperation in the region and also help build the supervisory capacity of Central Banks in the region.
“We are grateful to the Bank of England for appreciating how important these regional events are in supporting the Bank of Ghana’s efforts to strengthen cross-border supervisory cooperation in the region. Indeed, these regional events help to build the supervisory capacity of Central Banks in the region through peer learning, and help us find cutting-edge solutions to supervisory concerns that are common to us, particularly as we strive to promote more effective regulation and supervision of Pan-African banks that operate in several African countries and beyond,” she stated.
“As we look ahead in an uncertain economic future, it is my hope that the peer learning from this training event will help supervisors in Africa to improve the quality of microprudential supervision of banks’ credit risk, and help to better promote the stability and resilience of Africa’s banking system,” she added.
