BoG Orders Banks, SDIs and NBFIs to Write Off Fully Provisioned Loans to Curb NPLs
The Bank of Ghana (BoG) has directed banks, specialised deposit-taking institutions (SDIs) and non-bank financial institutions (NBFIs) to write off all fully provisioned loans and those with no realistic prospects of recovery, as part of efforts to reduce non-performing loans (NPLs) in the financial sector.
According to the Central Bank, regulated financial institutions (RFIs) with prior written approval from the BoG are required to immediately write off loans classified under the “loss” category, in line with prudential loan classification and provisioning norms.
The directive also applies to loans in the “substandard” and “doubtful” categories where there is no reasonable expectation of recovering contractual cashflows in a timely manner.
“All loans to be written off shall be fully provisioned in accordance with IFRS 9 impairment standards and the Bank of Ghana’s provisioning requirements,” the BoG stated in its notice.
The regulator, however, clarified that a loan write-off does not extinguish the legal right of RFIs to recover the debt, noting that institutions are expected to continue pursuing collections, sales, or transfers of such exposures.
Significantly, the BoG barred RFIs from writing off loans to related parties without its express approval. It further indicated that directors, key management personnel (KMPs), or significant shareholders who default on facilities for more than 180 days will be deemed unfit to continue in their roles.
Under the new rules, the BoG will withdraw approvals of such directors and KMPs, prohibit them from serving in any RFI in the future, and require significant shareholders in default to divest their holdings, with the proceeds applied to offset their credit obligations.
Additionally, RFIs will be mandated to publish the names of defaulters twice a year — by June 30 and December 31 — in at least two national newspapers and on their respective websites.
The directive by the Central Bank forms part of its broader strategy to strengthen credit risk management and enhance confidence in the banking system.
