The Bank of Ghana intensified regulatory action in 2025 to tackle lingering asset-quality weaknesses in the banking industry, even as the sector posted stronger profitability and capital levels.
The Financial Stability Review 2025 published by the Central Bank says non-performing loans remained elevated, prompting the central bank to issue new directives aimed at improving underwriting, monitoring, restructuring, and recovery practices.
According to the report, the banking industry’s NPL ratio fell to 18.9% in December 2025 from 21.8% in December 2024, but it still remained above pre-DDEP levels. The ratio of NPLs net of provisions to capital improved to 7.6% from 11.1% a year earlier, while the adjusted NPL ratio dropped to 5.0% from 8.5%. The Bank of Ghana said the improvement reflected stronger supervision, recapitalisation, improved recoveries, and slower growth in new bad loans, though the legacy burden of impaired assets continues to weigh on the sector.
To strengthen discipline in lending, the central bank introduced a prudential NPL threshold requiring regulated financial institutions to reduce NPL ratios to 10% or below by the end of 2026. Institutions with NPLs above 15% face immediate dividend and bonus restrictions, while those between 10% and 15% are subject to conditional restrictions. The new framework also requires timely write-offs of fully provisioned loans and tighter rules on loan restructuring so that distressed assets are not prematurely reclassified as performing.
The review says the sector’s soundness has improved significantly despite the still-high NPL burden. The Banking Sector Soundness Index ended 2025 well above 2024 levels, and capital adequacy strengthened as banks retained earnings, raised new capital, and shifted toward less risky portfolios. The sector’s leverage ratio also improved to 6.6 from 5.1 a year earlier, reinforcing the picture of a system with stronger buffers.
Regulators also adjusted foreign exchange risk controls by revising reserve requirements and net open position limits to reduce exposure to currency volatility. The review said these steps are designed to support financial stability while encouraging measured credit growth as inflation eases and economic conditions improve.
