- BoG Cautions Banks Despite Strong Asset Growth and Improved Capital
Ghana’s banking sector remains strong and resilient, but elevated credit risks continue to pose a major threat to financial stability, Bank of Ghana Governor Dr Johnson Asiama has warned.
Addressing bank Chief Executive Officers and Managing Directors, Dr Asiama said the industry had recorded significant improvements in asset growth, capital adequacy and asset quality, reflecting stronger balance sheets and the impact of recent regulatory and institutional reforms.
Total banking sector assets expanded by 26.60% to GHS 493.90 billion, while the industry’s capital adequacy ratio improved to 22.30%, from 17.50% a year earlier.
The sector’s non-performing loan ratio also declined from 23.60% to 18.00%, signalling improvement in asset quality and loan recovery efforts across the industry.
“I am particularly encouraged by the continued improvement in the banking sector. Total banking sector assets expanded by 26.6 percent to GH¢493.9 billion. Your capital adequacy also strengthened, with the industry ratio increasing to 22.3 percent from 17.5 percent a year ago,” Dr Asiama said.
“Asset quality has also improved, with the NPL ratio declining from 23.6 percent down to 18 percent,” he added.
The figures point to a banking industry that is recovering from recent macroeconomic pressures, including the effects of high inflation, currency volatility, the domestic debt exchange programme and tighter credit conditions.
For the Bank of Ghana, the improvement reflects both institutional resilience and the collective efforts of regulators and banks to restore confidence in the financial system.
“These developments demonstrate the resilience of the banking sector and reflect the collective efforts undertaken by all institutions, including ourselves represented right here,” Dr Asiama stated.
But the Governor warned that the better headline numbers should not lead banks into complacency.
He said credit risks remain elevated and must be managed aggressively if the industry is to maintain the progress recorded over the past year.
“Nonetheless, we must not become complacent. Elevated credit risks remain a concern and banks must continue to strengthen credit underwriting standards,” he cautioned.
“They have to improve recovery processes and they must comply fully with regulatory requirements that are aimed at reducing non-performing loans to tolerable prudential targets,” he added.
The warning is significant because the sector’s NPL ratio, though improved, remains high at 18.00%.
A high NPL ratio means a sizeable portion of loans are either not being repaid on time or are at risk of default. This can reduce profitability, weaken banks’ appetite for lending and limit credit flow to businesses and households.
For Ghana’s economic recovery to be sustained, banks will need to lend more to productive sectors. But stronger lending must be matched by better credit assessment, effective monitoring and faster recovery processes.
The Governor’s message therefore reflects a delicate balance: the banking sector is stronger, but risk discipline must improve.
Dr Asiama’s comments also come at a time when the domestic economy is showing signs of renewed momentum.
He said the Composite Index of Economic Activity expanded by 12.60% in March 2026, compared with 2.30% during the corresponding period last year.
According to him, the improvement was supported by robust growth in private sector credit, industrial activity, consumption and trade.
“The domestic economy continues to demonstrate remarkable resilience. The Composite Index of Economic Activity expanded by 12.6 percent in March 2026 compared with 2.3 percent in the corresponding period last year,” he said.
“This strong performance was supported by robust growth in private sector credit, industrial activity, consumption and trade,” he added.
The stronger economic activity provides a positive backdrop for the banking industry. When businesses expand and consumers spend, banks typically benefit from stronger demand for credit, improved transaction volumes and better loan performance.
However, economic recovery can also create new risks if banks relax underwriting standards too quickly in search of loan growth.
That is why the Governor’s caution is timely.
Ghana’s banking sector must support growth without repeating lending practices that contributed to high NPLs in the past.
Dr Asiama also noted that inflation remains largely under control, even though headline inflation has edged up in recent months.
Inflation rose from 3.20% in March to 3.40% in April and further to 3.70% in May 2026. However, he said core inflation continued to decline, suggesting that underlying price pressures remain subdued.
“Inflation remained firmly under control. Headline inflation edged up slightly to 3.4 percent in April. It has since gone further to 3.7 percent in May 2026 from 3.2 percent in March,” he explained.
“However, it is important to note that core inflation continued to decline, confirming that underlying inflationary pressures remain subdued,” he added.
Lower inflation is generally positive for banks because it supports macroeconomic stability, reduces pressure on interest rates and improves repayment capacity for borrowers.
But if inflation begins to rise again, households and businesses could face renewed cost pressures, weakening loan performance and increasing credit risk.
The Governor also pointed to Ghana’s stronger external position as another source of resilience.
He said the current account surplus improved to US$3.10 billion in the first quarter of the year, supported by strong export earnings from gold and cocoa, as well as stable remittance inflows.
Gross international reserves increased to US$14.40 billion, providing import cover of 5.70 months and strengthening Ghana’s buffers against external shocks.
“The external sector remains resilient. The current account surplus strengthened to $3.1 billion during the first quarter of the year, supported by strong export earnings from gold and cocoa together with stable remittance inflows,” Dr Asiama said.
“Gross international reserves increased to $14.4 billion, providing import cover of 5.7 months and strengthening buffers against external shocks,” he noted.
These external sector gains are important for the banking sector because reserve accumulation and stronger foreign exchange buffers can help stabilise the cedi, reduce uncertainty and improve business confidence.
A more stable currency environment also helps banks manage foreign currency exposures and supports borrowers with dollar-linked obligations.
Still, the Governor’s overall message was clear: the banking sector is stronger, but risk management must remain tight.
Banks must not allow improving macroeconomic conditions to weaken credit discipline.
Instead, they must use the recovery period to strengthen underwriting, improve collateral verification, intensify loan monitoring and reduce NPLs further.
The decline in NPLs from 23.60% to 18.00% is encouraging, but the ratio remains above levels that would be considered comfortable for a resilient and growth-supporting banking sector.
To bring NPLs closer to prudential targets, banks will have to improve recovery efforts and be more selective in extending credit.
For businesses, this may mean stricter loan appraisal, stronger documentation requirements and closer monitoring of repayment performance.
For the economy, however, better credit discipline could improve the quality of lending and reduce future financial sector vulnerabilities.
Dr Asiama’s caution therefore reflects a broader policy priority: Ghana needs a banking sector that is not only profitable and well-capitalised, but also capable of lending responsibly to support productive growth.
The latest figures show that the industry is in a stronger position than it was a year ago.
Assets are growing, capital is stronger and NPLs are declining.
