Banks Getting Stronger

Ghana’s banking sector is getting stronger with capital adequacy ratio at 19.1 percent at the end of August, which is significantly above the prudential requirement of 10 percent.

Dr Ernest Addison, Governor of the Bank of Ghana, disclosed this in Accra during the inauguration of a new head office of Standard Chartered Bank off the Independence Avenue.

“Non-performing loans of the industry continue to decline and we expect a major reduction, as banks begin to implement write off policies in line with approvals received from Bank of Ghana to address the legacy loans that have been fully provisioned for.

“We have also observed a return to efficiency in the industry, as operating expenses across banks are beginning to reduce which should ultimately result in declining interest rates. With the increased capitalization of banks, declining levels of nonperforming loans, and better credit risk assessment in the banking system, we should expect the pricing of credit to reflect these trends. Interest rates and spreads that have been slow to adjust should move in line with inflation.”

Dr Addison said such conditions would lead to improved access to credit for small and medium enterprises.

Exchange rate

The Governor said the impact on the exchange rate in Ghana had been somewhat moderated compared to other emerging markets and frontier economies, a testament to the gains in macroeconomic stability achieved over the past 18 months.

“While currencies in other emerging markets are still under stress, Ghana’s currency has recently regained some stability and the local currency is gradually becoming more stable.”

Solid financial sector

According to him, the country’s financial sector is solid, well-capitalized and healthy.

“Over the last year, we have seen further improvements as the reforms begin to take shape. However, we have a few institutions in the sector that have come under stress in both banks and specialized deposit taking institutions. What are common among these institutions are unsustainable business models and poor corporate governance practices which have led to the misapplication of depositors funds and pushed them to the threshold of insolvency with liquidity shortages.

“And we have all been witnesses to how customers of these institutions have reacted. These developments are not a reflection of the industry. We have very strong banks and savings and loans that are doing well. However, we are working with the Ministry of Finance on a recovery plan which we expect to be implemented soon.”

Cyber security

He also stated that as part of the National Cyber Security Awareness Month (NCSA) in October, which was launched recently, the Central Bank would inaugurate its Security Operations Centre (SOC) on 22nd October and also launch the cyber and information security directive for the industry.

“Subsequent to the issuance of the directive, banks would be required to follow an implementation schedule to ensure that effective cyber security controls are in place to counter any form of cybercrime.”

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