BoG's new banking reforms could choke growth - IERPP warns

The Institute of Economic Research and Policy (IERPP) has issued a warning. They cautioned the Bank of Ghana (BoG) against rushing into new regulatory reforms. This haste could undermine progress in the banking sector.

Prof. Isaac Boadi, Executive Director of IERPP, emphasized that regulations should ensure stability. He stated, “Regulations must safeguard stability, not choke growth.” He urged the central bank to take a phased and data-driven approach to reforms.

The BoG's new regulatory framework includes several measures. These include the Dual-Currency Reserve Requirement and a cap on cross-currency card transaction fees. There is also a requirement for mandatory disclosure of issuer fees.

While these measures aim to improve stability and transparency, IERPP suggests adjustments. For example, setting high reserve thresholds for the Dual-Currency Reserve Requirement could limit credit availability. A gradual rollout is recommended to avoid liquidity issues.

Additionally, the 2% cap on cross-currency card transaction fees may hurt bank revenues. A tiered fee system could offer flexibility while still protecting consumers.

IERPP also warns about enforcing a sudden Non-Performing Loan (NPL) ratio cap of 10%. This could lead banks to make aggressive write-offs, reducing credit access. They recommend a phased approach with performance-based incentives instead.

Prof. Boadi stressed the importance of careful consideration in implementing reforms. He stated that execution must be precise and involve consultation. This will help maintain momentum without causing negative effects.

He acknowledged the BoG’s commitment to financial integrity and resilience but reiterated the need for caution in reform implementation.