The Bank of Ghana (BoG) says the clean-up of the banking sector, which led to the collapse of seven indigenous banks, is now beginning to pay off.
Non-Performing Loans (NPLs) in the banking sector declined from 21.6 per cent in 2017 to 18.2 per cent in 2018.
Governor of Bank of Ghana (BoG), Dr. Ernest Addison, who revealed this to journalists on Monday in Accra, said the implementation of the Central Bank’s ‘loan-loss write-off’ policy following the clean-up exercise had led to the decline in NPLs.
According to him, “The 23 banks that survived the recapitalization exercise, which ended in December 2018 are sound, liquid and well-capitalized, and well-positioned to translate the gains made so far from the two years of far-reaching reforms to the rest of the economy.”
He disclosed that at the end of December 2018, total assets of the banking sector grew by 14.7 per cent year-on-year to GH¢107.3 billion.
The Governor explained that key financial soundness indicators have also improved in the banking sector.
Dr Addison said the industry’s solvency, which is measured by the Capital Adequacy Ratio (CAR), had increased to 21.9 per cent at the end of December 2018, significantly above the prudential requirement of 10 per cent.
Asset quality, he said, also improved during the period, stressing that “going forward, growth in industry assets is expected to rebound as banks deploy their newly-injected capital towards financial intermediation.”
He added that “other key financial soundness indicators remain positive and are projected to improve.”
“The Monetary Policy Committee observed that 2018 ended on a solid note with a more consolidated banking sector, as weaker and undercapitalized banks that posed risks to financial stability were removed.”
“This enhanced the efficiency and profitability of the remaining banks and has restored confidence and resilience in the banking sector, with the banks now better positioned to support private sector-led growth in the Ghanaian economy.”
Dr Addison indicated that the clean-up exercise also protected GH¢11.6 billion belonging to over 1.5 million depositors.