Exercise prudence in adjusting lending rates –Asiama tells banks

Dr. Johnson Pandit Asiama, Governor of the Bank of Ghana

Dr. Johnson Pandit Asiama, the Governor of the Bank of Ghana, has urged banks to be cautious with lending rates. He emphasized the importance of clear communication with clients.

He stated that viable businesses should continue to receive support. Tailored solutions are needed for vulnerable sectors.

The Governor spoke at the first post-Monetary Policy Committee (MPC) meeting in Accra. This meeting included Chief Executive Officers from various banks. He noted that these discussions help align policy direction and efforts for economic stability.

The MPC raised the policy rate by 100 basis points to 28 percent. This decision aims to strengthen the disinflation process, which is currently slow.

Dr. Asiama mentioned ongoing improvements in financial stability. However, he acknowledged that challenges still require focused efforts.

He highlighted recent gains in macroeconomic stability after the Debt Exchange Program (DDEP). Improved bank profitability and high liquidity are enhancing banking sector soundness.

Even without reliefs, the Banking Sector Soundness Indicator (BSSI) shows improvement. This is due to better solvency and asset quality amid strong liquidity and profitability.

The banking sector experienced a 34.05 percent year-on-year asset growth by February 2025. This growth was mainly funded by deposits, which increased by 27.89 percent.

The industry remains solvent with a Capital Adequacy Ratio of 14.35 percent. This is above the regulatory minimum of 10 percent, with most banks exceeding this threshold.

However, some domestically controlled and state-owned banks face solvency concerns. Recapitalization efforts for these banks remain unclear and need priority attention.

“We are working closely with affected institutions,” Dr. Asiama said. The goal is to achieve sustainable capital levels and restore depositor confidence.

To address rising credit risks, he urged banks to enhance risk management frameworks. Improvements in underwriting, early warning systems, and provisioning practices are essential.

The central bank expects better loan origination and monitoring processes soon. Dr. Asiama encouraged strategic partnerships and digital transformation within banks.

He also mentioned product innovation as crucial for growth in financial services. The Bank of Ghana will engage more with non-bank financial service providers to foster innovation while ensuring consumer protection.

By Morkporkpor Anku
GNA