Investigative Special Report | Banking, Financial Stability and Credit Risk
By Alex Ababio
Ghana’s banking sector has reached an important recovery milestone, with all 23 operating banks now meeting the Bank of Ghana’s regulatory capital requirements. However, falling bad-loan ratios, stronger capital buffers and expanding bank assets do not automatically guarantee cheaper loans, wider access to credit or lasting financial stability.
At the centre of the recovery is a banking industry still dealing with the consequences of the Domestic Debt Exchange Programme (DDEP), which forced financial institutions to absorb losses on government securities. The next challenge for regulators and bank executives is to ensure that the improved financial position translates into stronger lending, better risk management and greater protection for depositors.
Speaking at the 43rd Annual General Meeting of the Ghana Association of Banks and the launch of the sixth edition of the GH Bankers’ Voice Magazine in Accra on Thursday, October 8, 2026, Bank of Ghana Governor Dr Johnson Pandit Asiama announced that all 23 banks had satisfied the regulatory capital requirements.
The announcement represents a significant development following the financial pressures triggered by Ghana’s debt restructuring. Yet the central bank’s own figures show that credit risk remains a major concern, with the industry’s non-performing loans ratio still above the prudential limit.
From debt crisis to banking recovery
According to Dr Asiama, the 2022 audited financial statements showed that 13 banks had breached regulatory capital requirements because of the economic crisis and impairment losses on financial assets.
“Through the collective efforts of banks, shareholders, investors, the Association, Government and the Bank of Ghana, all 23 banks have now met the regulatory capital requirements. This is a significant achievement,” he said.
The crisis was closely connected to the government’s Domestic Debt Exchange Programme, launched in December 2022 to restructure approximately GH¢137 billion in domestic notes and bonds, including government, E.S.L.A. and Daakye securities.
The Ministry of Finance explained that the programme was intended to support the government’s debt restructuring efforts during a severe economic crisis. However, the exchange also exposed financial institutions holding affected securities to substantial valuation losses.
The International Monetary Fund (IMF), in its 2024 assessment of Ghana’s economy, documented the effect of the restructuring on the financial sector. It reported that the capital adequacy ratio, measured using Bank of Ghana regulatory forbearance measures, fell from 19.4 per cent in June 2021 to 14.2 per cent in August 2023.
The IMF also noted that non-performing loans increased from 14.1 per cent in December 2022 to 18.7 per cent in June 2023, reflecting the economic slowdown and rising interest rates.
These figures demonstrate the scale of the financial pressure that banks faced following the debt exchange.
In May 2024, the World Bank announced support for Ghana’s Financial Sector Strengthening Strategy through assistance intended to recapitalise viable banks and specialised deposit-taking institutions affected by the DDEP.
Robert R. Taliercio, then World Bank Country Director for Ghana, Liberia and Sierra Leone, said the project would provide solvency support to affected institutions and help protect access to savings, payments and other essential financial services.
The support formed part of a wider effort to restore financial-sector resilience. The Governor’s latest announcement indicates that the banking industry has since moved beyond the capital shortfalls identified in the immediate aftermath of the restructuring.
However, meeting regulatory capital requirements is not the same as demonstrating that every bank can withstand every possible economic shock.
GH¢500.20 billion in assets: What the figures reveal
The banking sector has recorded substantial balance-sheet growth.
As of the end of August 2026, total banking-sector assets had increased by 20.47 per cent to GH¢500.20 billion, compared with GH¢415.20 billion in August 2025.
The sector’s capital adequacy ratio also improved from 18.28 per cent to 19.10 per cent over the same period, significantly exceeding the regulatory minimum of 13 per cent.
The capital adequacy ratio measures a bank’s regulatory capital relative to its risk-weighted assets. It helps indicate the extent to which a bank has capital available to absorb losses arising from its lending and other financial activities.
A ratio above the regulatory minimum provides a buffer, but its adequacy ultimately depends on the risks facing each institution and the quality of its assets.
The Governor has therefore warned banks against treating the recovery as the end of the reform process.
He said restoring regulatory capital was only the beginning. Banks must maintain capital appropriate to their individual risk profiles and build sufficient buffers to withstand future shocks.
In 2025, the Bank of Ghana conducted a comprehensive thematic review of banks’ business models to assess their viability and long-term sustainability. The vulnerabilities identified were shared with the relevant institutions, and engagements with boards and senior management commenced.
The central bank intends to conduct a second round of Business Model Analysis in 2027.
This is an important supervisory development because a bank may satisfy minimum capital requirements while remaining exposed to concentrated lending, unstable funding sources or business strategies that become vulnerable when economic conditions deteriorate.
The central bank’s challenge is to ensure that reported improvements reflect sustainable financial strength rather than temporary relief from economic pressures.
Bad loans remain a major vulnerability
Despite the improvement in capitalisation, bad loans remain one of the banking sector’s most pressing concerns.
The non-performing loans ratio declined from 20.77 per cent in August 2025 to 15.66 per cent in August 2026.
Although the reduction represents progress, the ratio remains above the Bank of Ghana’s prudential limit of 10 per cent, which banks are required to meet by the end of December 2026.
Non-performing loans are credit facilities whose repayment has become seriously overdue or otherwise meets the applicable classification criteria. Persistently high levels can weaken profitability, tie up funds that could support new lending and increase the risk of losses.
In August 2025, the Bank of Ghana issued Notice No. BG/GOV/SEC/2025/23, titled Regulatory Measures to Reduce Non-Performing Loans in Banks, SDIs and NBFIs.
The notice applies to banks, specialised deposit-taking institutions and non-bank financial institutions. It requires regulated institutions to strengthen credit-risk management, establish appropriate lending criteria and improve the oversight of loans throughout their life cycle.
The central bank stated that the measures were designed to address risks to financial institutions’ “profitability, liquidity and solvency” and threats to financial-system stability.
The requirements also place responsibility on boards to approve and periodically review credit-risk strategies and policies.
Dr Asiama said banks must strengthen underwriting standards, credit administration, loan monitoring, restructuring practices, collateral management, write-offs and recovery processes.
He explained that the supervisory approach was shifting away from merely provisioning for problem loans towards actively preventing, managing, recovering and resolving them.
The Bank of Ghana is also preparing a Credit Risk Management Directive to complement the existing notice.
The December deadline creates a significant test for the industry. Banks must demonstrate that they can reduce bad loans without weakening credit standards or taking actions that simply conceal the underlying quality of their loan portfolios.
For businesses seeking financing, the issue is equally important: healthier loan books could strengthen banks’ ability to lend, but the benefits will depend on credit pricing, lending criteria and the willingness of institutions to finance viable enterprises.
Liquidity and stress testing: Preparing for the next shock
Capital adequacy is only one part of banking stability. Institutions must also maintain sufficient liquidity to meet withdrawals, payment obligations and other short-term funding needs.
Dr Asiama said the Bank of Ghana was preparing to publish a Liquidity Coverage Ratio Directive to establish the prudential liquidity requirement for banks.
The Liquidity Coverage Ratio is designed to ensure that financial institutions hold sufficient high-quality liquid assets to cover projected net cash outflows over a 30-day stress period.
The Governor said banks should not treat the ratio as merely another regulatory figure. Instead, it should support a broader liquidity-risk management culture involving contingency funding arrangements, diversified funding sources and effective asset-liability management.
The central bank has also strengthened its macroprudential stress-testing framework and engaged banks on the results of assessments conducted under severe but plausible economic and financial scenarios.
These exercises help supervisors and institutions examine how banks might respond to adverse developments affecting their balance sheets.
The Governor expects banks to use the findings to inform capital planning, liquidity management, risk appetite and strategic decisions.
For the industry, the practical challenge is to ensure that capital and liquidity remain sufficient even when economic conditions become less favourable.
Cybersecurity, digital fraud and artificial intelligence
As banks expand digital services, their exposure to operational and technological risks is also increasing.
Dr Asiama identified cybersecurity, digital fraud, data protection, third-party dependencies, cloud computing and operational resilience as areas receiving greater supervisory attention.
Following the publication of the revised Cyber and Information Security Directive, the Bank of Ghana has continued working with the banking industry to support implementation. It also plans thematic reviews to assess compliance.
The central bank’s 2026 Cyber and Information Security Directive includes specific provisions on artificial intelligence and machine learning systems used by regulated financial institutions.
The directive establishes requirements covering governance, accountability, risk management, data management, model testing, cybersecurity, third-party providers and operational resilience.
These provisions matter because AI-based systems can influence credit scoring, loan underwriting, fraud detection and customer services. Errors in data or poorly controlled models could produce inaccurate decisions, expose sensitive information or create new avenues for fraud.
Dr Asiama said the Bank of Ghana was developing a Directive on the Use of Artificial Intelligence in the Financial Sector to promote responsible experimentation and innovation while ensuring appropriate governance throughout the AI lifecycle.
He acknowledged that AI could improve credit assessment, fraud detection, customer service, risk management and operational efficiency, while introducing risks involving data quality, model risk, cybersecurity and consumer protection.
The policy challenge is to encourage useful innovation without allowing technology-related risks to undermine consumer confidence or financial stability.
What the recovery means for customers and businesses
The banking sector’s improved capital position is encouraging, but its broader economic significance will depend on how effectively banks support households, businesses and productive investment.
The World Bank’s 2024 financial-sector support announcement emphasised the importance of adequately capitalised institutions in maintaining access to savings, payments and other core financial services.
However, recapitalisation alone cannot guarantee lower interest rates or easier access to business loans. Those outcomes also depend on inflation, funding costs, borrowers’ creditworthiness, government borrowing, competition and banks’ assessments of risk.
The central bank must therefore monitor not only regulatory compliance but also whether institutions maintain sound lending practices and sustainable business models.
The same scrutiny should apply to the reduction in non-performing loans. A falling ratio is a positive indicator, but a complete assessment requires examining the underlying loan book, recoveries, restructurings, write-offs and new lending.
Public reporting on these issues can help customers, investors and businesses understand whether improvements in headline indicators reflect lasting changes in financial-sector performance.
The next test for Ghana’s banking regulator
Dr Asiama said the question was no longer whether the banking sector had recovered from the crisis that followed the Domestic Debt Exchange Programme and emerged more resilient, but whether enough was being done to preserve those gains and prepare for future shocks.
He stressed that regulation alone could not create a resilient banking sector. Boards, senior management and financial institutions themselves must build strong risk cultures and sustainable business models capable of serving customers during both favourable and difficult economic conditions.
The immediate priorities are clear: meet the December 2026 deadline for reducing non-performing loans, strengthen credit-risk management, maintain appropriate capital and liquidity buffers, and address growing cybersecurity and AI-related risks.
For Ghana, the significance of all 23 banks meeting regulatory capital requirements extends beyond the banking industry. A stable banking system is essential for protecting deposits, supporting payments, mobilising savings and financing economic activity.
But the recovery will ultimately be judged by more than compliance figures. Its durability will depend on whether banks can withstand future shocks, manage bad loans responsibly and provide sustainable financing to businesses and households without recreating the vulnerabilities that followed the debt crisis.