BoG to block dividends, bonuses for banks with high bad loans from 2027

The Bank of Ghana has announced a new directive that will bar banks and other regulated financial institutions with high levels of non-performing loans (NPLs) from paying dividends to shareholders or awarding bonuses to staff from January 2027.

Under the rules, institutions with NPL ratios between 10 and 15 percent will be granted a two-year grace period to clean up their loan books before sanctions take effect.

Banks and lenders whose NPLs exceed 15 percent will face immediate restrictions, including bans on dividend payouts, bonus payments and the expansion of loan portfolios.

For microfinance and smaller deposit-taking institutions, the central bank has set an even stricter ceiling, imposing a 5 percent NPL threshold.

The Bank of Ghana explained that the measure is designed to strengthen credit risk management practices, safeguard depositors’ funds and ensure improved asset quality in the financial sector.

By tightening the rules, the regulator hopes to prevent excessive risk-taking and compel financial institutions to prioritise the recovery of distressed assets.

“The objective is to ensure that shareholder value and employee incentives are tied to prudent banking practices and sound loan portfolio management. Institutions with high levels of bad loans cannot continue to distribute profits while carrying risks that threaten financial stability,” a statement from the central bank noted.

The new directive means shareholders of banks with weak loan books should not expect dividend distributions, while staff will see incentive packages curtailed if NPLs remain above the regulatory threshold.

Customers could also face stricter credit requirements, as lenders move to avoid breaching the limits set by the regulator.