13 banks that experienced capital shortfalls following the Domestic Debt Exchange Programme (DDEP) have successfully met or exceeded their recapitalization requirements as of the end of 2024.
These institutions are on track to restore their Capital Adequacy Ratio (CAR) to the mandated 13 percent by the end of 2025.
Despite this encouraging progress, one state-owned bank, alongside several others, remains significantly behind schedule. Factors contributing to their struggles include delays in shareholder capital commitments, elevated levels of non-performing loans (NPLs), and slow recognition of credit impairments and provisioning.
According to a recent IMF Country Report, these banks are now under intensified supervision from the Bank of Ghana, which is enforcing corrective measures to ensure they meet their recapitalization targets by the approaching 2025 deadline. Furthermore, the approval and implementation of the World Bank-funded segment of the Ghana Financial Sector Stability Fund (GFSF) could provide additional support to some of these institutions, contingent on securing adequate capital injections to qualify for assistance.
The report highlights ongoing efforts from Ghanaian authorities to improve credit quality and tackle financial sector legacy issues. While growth in NPLs has slowed, the overall NPL ratio remains high, standing at 22.6 percent as of 2024—though this is a decrease from 26.7 percent in the first quarter of the year.
To mitigate the NPL burden, regulators are urging banks to strengthen their credit risk management systems, enhance skills in loan classification and provisioning, and closely monitor the effectiveness of NPL reduction strategies.
Furthermore, the IMF report indicates that specialized deposit-taking institutions (SDIs), crucial for promoting financial inclusion, continue to be weighed down by undercapitalization and unresolved legacy challenges. Key components of the Ghana Financial Sector Strengthening Strategy (GFSSS) remain to be implemented in order to address these issues effectively.
The Bank of Ghana is also revisiting its prudential and operational risk standards, progressing with the implementation of Basel II and III framework. Notably, the Bank has officially communicated to the industry that all regulatory reliefs granted after the DDEP will come to an end by the close of 2025, signaling the need for banks to bolster their resilience moving forward.
As the Ghanaian financial sector navigates these challenges, the combined efforts of regulatory bodies and banking institutions will be critical in ensuring a sustainable and stable economic environment.
Source: Apexnewsgh.com
