The Bank of Ghana has emphasised its commitment towards the continuous implementation of measures to reduce Non-Performing Loans (NPLs) and mitigate credit risk including working with banks to improve the use of credit reporting and collateral registry systems and increase onsite supervision.

This would be done by undertaking periodic thematic loan book reviews of banks to ensure that losses are fully recognised early and accounted for.

In the 2024 Financial Stability Review, the Central Bank said the banking industry’s resilience to heightened credit risk following the full impact of the debt restructuring is relatively weak.

“Non-performing loans remain elevated, reflecting the lagged effect of the COVID-19 pandemic and the recent macroeconomic challenges. The stress test revealed that if macroeconomic recovery is largely slow-paced leading to a mild deterioration in credit quality, CAR [Capital Adequacy Ratio] may reduce further over a one-year horizon”.

 Solvency conditions could marginally reduce below 10% if macro-financial conditions one year ahead led to severe deterioration in credit quality”, it added.

 The results, the Central Bank alluded reinforce the need to ensure a robust macroeconomic recovery in the near to medium term.

To contain credit risks, it explained that banks would have to maintain a sound credit risk management system and adhere to the Bank of Ghana directive on suspending dividend payments while frontloading recapitalisation plans.

The credit risk stress test estimates the sector’s solvency position following an extreme but plausible deterioration in the quality of loan assets. The impact of the decline in credit quality on the solvency position is estimated using the loan migration model.

The loan migration model stresses banks’ loan portfolios by reclassifying loans to reflect a higher degree of loan impairments under the following assumptions.