The Governor of the Bank of Ghana, Dr Johnson Asiama, has described Ghana’s banking sector as sound, profitable, and well-capitalized, even as credit growth to households and businesses remains subdued.

Speaking at the opening of the 129th Monetary Policy Committee (MPC) meeting, Dr Asiama highlighted that the banking sector’s health is crucial for the effectiveness of monetary policy.

“The banking sector remains sound, it remains profitable, and it remains well capitalized. We have asset quality improving meaningfully over the past year,” he said.

According to him, improvements in the banking sector are essential not only for financial stability but also for ensuring that changes in the central bank’s policy rate translate effectively into credit conditions for the real economy.

“The extent to which changes in the policy rate translate into credit conditions for households and businesses is important,” Dr Asiama explained.

However, he noted that credit growth continues to be restrained and requires further examination to understand whether the constraint is coming from the supply side, such as banks’ risk appetite, capital buffers, or non-performing loan ratios, or from the demand side, reflecting weak borrowing demand from households and businesses.

“We need to evaluate whether the constraint is from the supply side, whether it’s still on the side of banks, or is it from the demand side, which is on the side of the borrowing public,” he said.

Dr Asiama emphasized that while the banking sector’s stability is a positive sign, subdued credit growth could limit the pace of economic recovery and the effectiveness of monetary policy.

“This committee was asked to exercise discipline in the face of improvement… but today the judgment required is more complex. We must make our decision at the intersection of domestic success and external uncertainty,” he added.

The MPC is expected to consider these developments carefully as it deliberates on the appropriate policy rate, balancing domestic improvements with global risks.