BoG Drives Banking Sector Reforms to Strengthen Foundations for Growth
By Praisebell Rosemond Larbi
With inflation easing to historic lows, the Bank of Ghana (BoG) is pivoting from crisis management to a new phase of financial sector reform focused on strengthening the structural foundations of the banking industry to support sustainable credit growth.
At a post-Monetary Policy Committee (MPC) engagement with chief executives and heads of banks in Accra, Governor Dr. Johnson Pandit Asiama signalled a decisive shift in regulatory focus, noting that the restoration of macroeconomic stability provides a window to reinforce the underlying architecture of the financial system.
The MPC, at its 128th meeting in January 2026, reduced the Monetary Policy Rate by 250 basis points to 15.5 percent, following a faster-than-expected decline in inflation. Headline inflation dropped sharply from 23.8 percent in December 2024 to 5.4 percent in December 2025, before falling further to 3.8 percent in January 2026, the lowest level since the adoption of inflation targeting in Ghana.
Dr. Asiama emphasised that although monetary conditions remain sufficiently tight relative to current inflation dynamics, policy discussions must now evolve beyond stabilisation. With regulatory relief measures largely concluded, he stressed that attention must shift “from resilience to structure,” underscoring the importance of building a more durable and forward-looking banking sector.
Over the past year, the central bank undertook a comprehensive thematic review of banks’ business models, examining funding structures, asset allocation, earnings composition and governance frameworks under both baseline and stress scenarios. While the review affirmed that the sector remains viable and profitable, it also highlighted structural vulnerabilities that require closer scrutiny as economic conditions normalise.
As part of the next phase of reforms, business model analysis will be embedded into routine supervisory assessments. This approach is expected to enhance early detection of emerging risks and support timely regulatory interventions, reflecting a more proactive and risk-sensitive supervisory stance.
Despite improvements in asset quality, non-performing loans (NPLs) remain above regulatory benchmarks. The Governor cautioned that as credit conditions ease and lending to the private sector picks up, banks must maintain strong underwriting standards and robust risk assessment frameworks to prevent a resurgence in asset quality deterioration.
He further called for a shift toward “purposeful intermediation,” urging banks to channel credit into productive sectors such as agriculture, manufacturing and small and medium-sized enterprises. According to him, this will be critical in ensuring that financial stability translates into real economic transformation without reintroducing systemic risks.
The broader macroeconomic environment has improved significantly. Real GDP grew by 6.1 percent in the first three quarters of 2025, supported by strong performance in the services and agriculture sectors. The BoG’s Composite Index of Economic Activity also points to sustained momentum across trade, industrial production, private sector credit and consumption.
Fiscal consolidation efforts have complemented the recovery, with improvements in the budget deficit, a stronger primary balance and a gradual decline in public debt. On the external front, robust export earnings and remittance inflows have supported a balance of payments surplus and strengthened foreign exchange reserves.
Within this context of stability, the BoG’s reform agenda is increasingly focused on durability. Strengthening governance, promoting disciplined innovation and ensuring resilient business models are expected to define the next phase of banking sector development. The central bank reaffirmed its commitment to engaging industry players as a “firm, fair and forward-looking partner,” providing support where necessary while maintaining clear regulatory expectations. With inflation under control and policy credibility restored, the emphasis is now on building a banking sector that is not only stable, but structurally equipped to drive long-term economic growth and private sector expansion
