Accra: The Bank of Ghana (BoG) has issued a directive to commercial banks, requiring them to reduce their non-performing loan (NPL) ratios to below 10 percent by the end of 2026. This initiative aims to bolster financial stability, stimulate credit growth, and support sustainable business financing.
According to Ghana News Agency, Dr. Johnson Pandit Asiama, the BoG Governor, reiterated the directive during a high-level forum organized by the Chartered Institute of Restructuring and Insolvency Practitioners (CIRIP), Ghana, in Accra. The forum, supported by the BoG, focused on the theme: 'Financing distressed companies: The impact of NPLs, IFRS nine standards and prudential regulations on post-commencement financing for distressed companies under rescue and possible interventions.'
In June 2025, the Central Bank instructed all regulated financial institutions (RFIs) to maintain NPL ratios at or below 10 percent. Institutions failing to comply by December 2026 must notify the regulator within 10 days and submit a board-approved reduction plan. Dr. Asiama noted that NPL ratios had decreased to 16.1 percent by June 2026 from over 23 percent in 2025, attributing the decline to regulatory measures implemented by the Central Bank.
Dr. Asiama emphasized that while progress has been made, 16.1 percent remains excessive, even if fully provisioned. He highlighted that high NPL levels constrain banks' ability to extend new credit, increase recovery costs, and absorb capital, especially affecting smaller and higher-risk borrowers. Reducing NPLs is thus not only a supervisory requirement but also part of efforts to support Ghana's broader economic development objectives.
Regarding financing distressed companies, the Governor stated that Ghana's Insolvency and Restructuring Act provides a framework for restructuring viable businesses instead of liquidating them. He stressed the importance of credible viability assessments to distinguish between firms facing temporary cash flow shocks and those delaying inevitable failure.
Dr. Asiama urged banks to closely monitor new financing provided to distressed companies, ensuring funds are directed towards productive activities such as retaining employees, securing inputs, and completing contracts. He called for a predictable and risk-sensitive framework for rescue financing, encouraging collaboration among insolvency practitioners, bankers, accountants, and regulators to establish clear rules, roles, and accountability mechanisms.
Dr. Ishmael Yamson, Chairman of the occasion and Board Chair of Scancom PLC (MTN Ghana), acknowledged the decline in NPLs but warned that some regulatory measures could discourage banks from providing rescue financing. He pointed out that current requirements, including restrictions on dividends, bonuses, and lending for banks with high NPL ratios, might impact institutions that offer post-commencement financing to distressed companies.
Dr. Yamson proposed excluding commencement financing from the NPL ratio calculation and the January 2027 loan portfolio growth restriction for a defined rescue period. This approach would ensure that banks financing sanctioned rescue plans are not penalized by directives meant to address the issues that post-commencement financing aims to solve. He advocated for prudential regulations that protect financial stability while allowing necessary financing to preserve jobs, sustain enterprises, and support economic growth.