The Bank of Ghana (BoG) has directed commercial banks to reduce their non-performing loan (NPL) ratios to below 10 per cent by the end of 2026.

The Central Bank said the reduction was necessary to strengthen financial stability, improve credit growth and support sustainable financing of businesses.

Dr Johnson Pandit Asiama, BoG Governor, reiterated the directive at a high-level forum organised by the Chartered Institute of Restructuring and Insolvency Practitioners (CIRIP), Ghana, in Accra.

The forum, supported by the BoG, was on the theme: “Financing distressed companies: The impact of NPLs, IFRS nine standards and prudential regulations on post-commencement financing for distressed companies under rescue and possible interventions.”

In June 2025, the Central Bank directed all RFIs to keep NPL ratios at or below 10 per cent, noting that RFIs that would breach the directive after December 2026 must notify the regulator within 10 days and submit a board-approved reduction plan.

Dr Asiama said NPL ratios had declined to 16.1 per cent by June 2026 from more than 23 per cent in 2025 following regulatory measures introduced by the Central Bank.

“That is progress and not sufficiency, and 16.1 per cent remains too high, even if it is fully provisioned. Our regulatory measures require each regulated institution to reduce its ratio to no more than 10 percent by the end of December this year,” he said.

Dr Asiama said high levels of non-performing loans constrained banks’ ability to extend new credit, increased recovery costs and absorbed capital, particularly affecting smaller and higher-risk borrowers.

He said reducing NPLs was therefore not only a supervisory requirement but also part of efforts to support Ghana’s broader economic development objectives.

On financing distressed companies, the Governor said Ghana’s Insolvency and Restructuring Act provided a framework for restructuring viable businesses instead of liquidating them.

“Rescue must begin with a credible test of viability; banks must distinguish between firms facing temporary cash flow shocks and those postponing inevitable failure,” he said.

He cautioned that without proper viability assessments, lenders risked concealing losses and weakening credit discipline.

Dr Asiama encouraged banks to ring-fence and monitor new financing provided to distressed companies and ensure that such funds were directed towards productive activities, including retaining employees, securing inputs and completing contracts.

“Legal priority alone does not make a transaction prudent or bankable. Post-commencement financing must be structured with clear milestones, security arrangements, and transparent reporting,” he said.

Dr Asiama called for a predictable and risk-sensitive framework for rescue financing, urging collaboration among insolvency practitioners, bankers, accountants and regulators to establish clear rules, roles and accountability mechanisms.

“Ghana does not have to choose between liquidating every distressed business, or relaxing standard to keep businesses alive. A disciplined rescue framework can preserve viable businesses while protecting financial stability,” he noted.

Dr Ishmael Yamson, Chairman of the occasion and Board Chair of Scancom PLC (MTN Ghana), acknowledged the decline in NPLs but cautioned that some regulatory measures could discourage banks from providing rescue financing.

He said current requirements, including restrictions on dividends, bonuses and lending for banks with high NPL ratios, could affect institutions that provide post-commencement financing to distressed companies.

“Carve out commencement financing from the NPL ratio calculation and from the January 2027 loan portfolio growth restriction, for a defined rescue period. So, a bank financing a sanctioned rescue plan is not penalised by a directive meant to fix the problem PCF is trying to solve,” he said.

Dr Yamson said rescue financing after insolvency should remain a fallback option and urged policymakers to focus on strengthening businesses’ capacity to manage risks and avoid distress.

He called for prudential regulations that protect financial stability while allowing financing needed to preserve jobs, sustain enterprises and support economic growth.