BoG orders banks to tighten credit risk rules
The Bank of Ghana (BoG) has introduced new regulatory measures aimed at reducing Non-Performing Loans (NPLs) in the banking sector, citing growing risks to profitability, liquidity, solvency, and overall financial system stability.
In a notice issued to all Regulatory Financial Institutions (RFIs), including banks, specialized deposit-taking institutions (SDIs), and non-bank financial institutions (NBFIs), the central bank directed institutions to strengthen their credit risk management frameworks.
According to the notice, all RFIs are required to maintain a robust credit risk management system and demonstrate its effectiveness to the BoG. The board of each institution will be responsible for approving and reviewing the credit risk strategy at least once a year.
RFIs must also implement board-approved credit-granting criteria, ensure that the credit-granting function is adequately resourced, and adopt appropriate systems to monitor the performance of individual or grouped loans. Institutions are also expected to carry out independent and ongoing assessments of their credit risk management processes.
NPL Ratio Limited to 10% by End of 2026
The BoG has set a prudential limit of 10 percent for the ratio of NPLs to gross loans. All RFIs are required to comply with this limit by December 31, 2026.
Institutions that exceed the limit after the deadline must notify the BoG within ten working days and submit a board-approved plan detailing how they intend to reduce the NPL ratio to 10 percent or below.
Loss Category Loans to Be Written Off
With prior written approval from the BoG, RFIs are required to write off loans classified in the “loss” category, as well as loans in the “substandard” and “doubtful” categories where there is no reasonable expectation of recovering contractual cash flows in a timely manner.
All write-offs must be fully provisioned in accordance with IFRS 9 impairment standards and BoG’s provisioning norms. The central bank clarified that writing off a loan does not imply forfeiture of legal rights to recover the debt. Institutions must continue efforts to collect, sell, or transfer these credits.
Loan Restructuring for Qualifying Borrowers
The BoG also authorized RFIs to restructure loans for qualifying borrowers in order to improve repayment sustainability. Institutions may initiate restructuring or respond to borrower requests, provided the process meets regulatory requirements and supports risk mitigation.
These measures are issued under Section 92 of the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930), and the Non-Bank Financial Institutions Act, 2008 (Act 774).
The BoG stated that the measures align with international best practices in credit risk management and are intended to strengthen the long-term health of the financial sector.
