The Bank of Ghana Governor, Dr. Johnson Asiama, has urged commercial banks to exercise prudence in adjusting their lending rates following the increase in the policy rate.

According to him, the commercial banks should maintain transparent communication with clients in carrying out this action.

He disclosed this at a meeting with captains of the commercial banks after the Monetary Policy Committee meeting.

The engagement was part of the Bank of Ghana’s maiden meeting with the heads of the various commercial banks at the Bank Square, the headquarters of the central bank.

This was also the first meeting with the banks by the new management of the central bank headed by Dr Asiama.

In attendance were chief executives or representatives of regulated banks in Ghana and officials of Bank of Ghana, including the 1st Deputy Governor, Dr. Zakari Mumuni.

Background

The Monetary Policy Committee of the Bank of Ghana, after its recent meeting to review the developments in the economy, hiked the policy rate by 100 basis points to 28%.

This is the first time since September 2024, that the Bank of Ghana reviewed its key lending rate to commercial banks.

Justification

The Governor noted that the decision was “aimed at reinforcing the disinflation process, which, while underway, remains too gradual to secure lasting stability.

“The decline in headline inflation from 23.8% in December to 22.4% in March confirms that recent policy actions are having the intended effect,”  the Bank of Ghana Governor observed

Dr. Asiama however noted that “ inflation expectations remain elevated, and core inflation is still above the medium-term target”.

“The Committee therefore adopted a proactive stance—guided by recent experience that delayed tightening can result in more persistent inflation and costlier adjustments” he added.

Post Policy Rate Hike and Concerns

Speaking at the meeting with heads of the various commercial banks, the Governor noted that the Bank of Ghana recognised the effect of the policy rate hike on borrowing costs of businesses and households.”

But was quick to add that “Viable businesses should continue to receive support, and tailored solutions to mitigate the impact on the most vulnerable sectors”.

Outlook and Concerns

The Bank of Ghana Governor noted that despite recent challenges  the banking sector, even without reliefs “ showed sustained improvement on the back of improving solvency and asset quality measures amid strong liquidity and profitability”.

Dr. Asiama was quick to add that despite these solid developments, solvency concerns persist, “especially few domestically controlled and state-owed banks, whiles capitalization efforts remain unclear".

The Governor was of the view that addressing these capital shortfalls in these banks remains a priority.

“We are working closely with the affected institutions to achieve sustainable capital levels, restore depositor confidence and ensure compliance with regulatory requirements” the Governor disclosed

The Governor also advised the commercial banks to be guided by the past banking resolutions, especially shaping their crises preparedness.