Banks Remain Sound and Well-Capitalised as Sector Strengthens – BoG
By Praisebell Rosemond Larbi
Ghana’s banking industry remains broadly sound, profitable, and well capitalised, supported by improving macroeconomic conditions and continued regulatory reforms, the Bank of Ghana has affirmed in its latest Monetary Policy Committee (MPC) update. The Central Bank’s assessment shows that the sector’s key financial soundness indicators have strengthened over the past year, reflecting enhanced resilience within the financial system.
According to the MPC, indicators covering solvency, profitability, asset quality and operational efficiency all recorded year-on-year improvements as at October 2025. The Bank credited the positive turnaround to stronger credit conditions, improved loan recoveries, and a more favourable macroeconomic backdrop, including lower inflation and declining interest rates.
One of the most notable developments in the sector is the sustained improvement in asset quality. The industry’s Non-Performing Loan (NPL) ratio dropped to 19.5 percent in October 2025, down from 22.7 percent recorded in the same period last year. The Central Bank explained that the reduction in impaired loans was driven by a combination of increased credit extension to productive sectors and a contraction in the overall stock of NPLs due to recoveries and write-offs.
“Asset quality pressures have eased considerably over the review period as the economy stabilises and banks strengthen their risk-management processes,” the MPC report noted. It added that although the improvement is encouraging, credit risks remain elevated, particularly in sectors that continue to face structural bottlenecks.
Despite these risks, banks recorded solid profitability over the period, supported by improved interest margins, strong fee-based income and cost-efficiency gains. With lending rates declining alongside the broader drop in money-market rates, the industry has also experienced growth in credit demand, contributing to an uptick in loan volumes. This expansion in credit has helped soften the impact of legacy NPLs and strengthened banks’ earning capacity.
Solvency levels across the sector remain above regulatory thresholds, according to the Bank of Ghana, underscoring the industry’s ability to absorb shocks. Most banks continue to maintain capital buffers above the minimum capital adequacy ratio, reflecting efforts to preserve balance-sheet strength after the challenges posed by the Domestic Debt Exchange Program (DDEP) in previous years.
Looking ahead, the Central Bank said it is taking steps to address residual vulnerabilities in the financial sector. Policy actions are being rolled out to recapitalise the small number of undercapitalised institutions, while the full implementation of the Bank of Ghana’s enhanced regulatory and supervisory guidelines, particularly those targeting NPL reduction will further reinforce the stability of the banking system.
“These measures will strengthen balance sheets and support sustained credit expansion to key sectors of the economy,” the MPC emphasised. The Central Bank added that ongoing macroeconomic improvements, such as stabilising inflation and the strengthening of the cedi, are expected to create an increasingly supportive environment for financial intermediation in 2026 and beyond.
Financial-sector analysts say the improved soundness indicators reaffirm confidence in the banking industry after several years of volatility. They argue that maintaining this momentum will require continued fiscal discipline, effective risk management by banks, and close regulatory oversight to prevent the re-accumulation of vulnerabilities.
With the sector returning to stronger footing, industry stakeholders express optimism that banks are now better positioned to increase lending, support private-sector growth and help sustain Ghana’s broader economic recovery.
