The Bank of Ghana is moving to tighten risk management across the banking industry with new directives on credit and liquidity, as Governor Dr Johnson Pandit Asiama warns banks that rapid credit expansion must not come at the expense of sound lending standards.
Addressing heads of banks, Dr Asiama announced that the central bank will soon issue a Credit Risk Management Directive designed to strengthen how financial institutions originate, administer, monitor, measure and recover loans.
The directive will complement the Non-Performing Loans (NPL) notice issued last year, as the Bank of Ghana intensifies efforts to improve asset quality across the sector.
Although the Governor acknowledged a significant decline in the banking industry’s NPL ratio, he cautioned that the level remains high relative to regulatory thresholds.
He therefore urged banks to strengthen credit risk management and fully comply with existing NPL guidelines.
“As private sector credit expands rapidly, this growth must be supported by sound underwriting standards and effective risk management frameworks,” Dr Asiama said.
According to him, the upcoming Credit Risk Management Directive is intended to ensure that the expansion of lending remains sustainable and does not create new vulnerabilities within banks’ balance sheets.
The Governor also announced plans to introduce a Liquidity Coverage Ratio Directive, establishing what he described as the first prudential benchmark for banks’ liquidity.
Under the framework, banks will be required to maintain sufficient high-quality liquid assets to withstand significant liquidity stress for a period of 30 days. The measure will complement liquidity risk management and monitoring directives issued earlier this year.
The central bank is also engaging individual banks on findings from its macroprudential stress tests, which assess the resilience of financial institutions under severe but plausible economic and financial shocks.
Dr Asiama urged banks to take identified vulnerabilities seriously, stressing that the central bank’s stress-testing exercise does not replace the responsibility of individual institutions to conduct their own assessments.
The Governor also placed fraud risk management firmly on the regulatory agenda following concerns raised by the Ghana Association of Banks over differences in how the fraud function is positioned within financial institutions.
“Fraud is a significant risk that requires our serious attention,” he cautioned, noting that banks must establish effective policies and controls capable of preventing, detecting and deterring fraud.
The measures, the governor said, form part of the Bank of Ghana’s broader effort to ensure that banking-sector expansion is backed by stronger governance, effective risk controls and prudent management.
