Elevated Credit Risks a Threat to Banking Sector Recovery from DDEP – BoG Governor
Dr. Ernest Addison, Governor of the Bank of Ghana, has highlighted the challenges posed by elevated credit risks to the banking sector’s recovery from the Domestic Debt Exchange Programme (DDEP) during his keynote address at the 41st Annual General Meeting of the Ghana Association of Banks (GAB).
The Governor noted that the banking industry’s Non-Performing Loans (NPL) ratio surged to 24.1% in June 2024, up from 18.7% a year earlier.
Despite this increase in NPLs, Dr. Addison acknowledged improvements in the sector over the past year, particularly in asset growth and profitability.
As of June 2024, total banking sector assets had expanded by 33.3%, reaching GH¢323.1 billion, compared to a 21.2% growth in June 2023.
The sector also recorded gains in liquidity and efficiency indicators, with the Capital Adequacy Ratio (CAR) remaining steady at 14.3%, though unadjusted for regulatory reliefs, it stood at 10.6%—up from 7.4% in June 2023.
“Despite improvements in the sector’s performance, elevated credit risks pose threats to the recovery process. The industry’s NPL ratio was 24.1 percent in June 2024, up from 18.7 percent in June 2023. The consistent rebound in profits, adherence to recapitalization plans and enforcement of strict credit underwriting standards are expected to help ensure that banks remain on the path to full recovery and resilience,” he quipped.
Dr. Addison also addressed the rise in fraud within the sector, with the total monetary loss from fraud cases increasing by 21% in 2023 to GH¢63 million, despite a 17% reduction in reported fraud cases.
A particular concern raised was the sharp increase in staff involvement in fraudulent activities, with cases rising by 46%, from 188 staff in 2022 to 274 in 2023.
Of these, 77% were involved in cash theft, up from 66% in 2022, underscoring the growing internal fraud risks facing banks and Specialised Deposit-taking Institutions (SDIs).
The Governor reiterated the Bank of Ghana’s commitment to fraud prevention and maintaining the financial stability of the sector, noting that measures are being put in place to strengthen detection and prevention efforts.
“The BOG is obviously concerned about this growing trend and mandates Banks and SDIs to strengthen their internal controls and enhance staff due diligence during recruitment, as well as reinforcing continuous in-house staff training on professional conduct,” he remarked.
