BoG orders banks to reduce NPL ratio to 10% by end-2026

The Bank of Ghana (BoG) has instructed commercial banks to reduce their non-performing loan (NPL) ratios to below 10 per cent by the end of 2026 as part of efforts to strengthen the banking sector and improve credit delivery to businesses.

The Central Bank said lowering bad loans is essential to maintaining financial stability, expanding access to credit and supporting sustainable economic growth.

BoG Governor Dr Johnson Pandit Asiama reaffirmed the directive while addressing a high-level forum organised by the Chartered Institute of Restructuring and Insolvency Practitioners (CIRIP), Ghana, in Accra.

The event, which was supported by the Central Bank, focused on the theme: “Financing distressed companies: The impact of NPLs, IFRS 9 standards and prudential regulations on post-commencement financing for distressed companies under rescue and possible interventions.”

In June 2025, the BoG directed all Regulated Financial Institutions (RFIs) to maintain NPL ratios of no more than 10 per cent. Institutions that fail to meet the target after December 2026 will be required to notify the regulator within 10 days and submit a board-approved strategy outlining how they intend to reduce their bad loan portfolios.

Dr Asiama noted that the banking sector’s NPL ratio had improved to 16.1 per cent as of June 2026, down from more than 23 per cent in 2025, following a series of regulatory interventions introduced by the Central Bank.

“That is progress, but it is not enough. An NPL ratio of 16.1 per cent remains too high, even where full provisions have been made. Every regulated institution must reduce its ratio to no more than 10 per cent by the end of December this year,” he said.

According to the Governor, high levels of non-performing loans weaken banks’ ability to extend fresh credit, increase recovery costs and tie up capital that could otherwise support lending, particularly to small businesses and higher-risk borrowers.

He stressed that reducing bad loans is not only a regulatory requirement but also a key step toward achieving Ghana’s broader economic development goals.

Speaking on the financing of distressed businesses, Dr Asiama said Ghana’s Insolvency and Restructuring Act provides a legal framework for restructuring viable companies instead of forcing them into liquidation.

He stressed that any rescue effort must begin with a proper assessment of a company’s viability, enabling banks to distinguish between businesses experiencing temporary financial difficulties and those with no realistic chance of recovery.

Without such assessments, he warned, lenders could end up masking losses while weakening overall credit discipline within the financial sector.

The Governor further advised banks to closely monitor funds advanced to distressed companies, ensuring the financing is used for productive purposes such as preserving jobs, purchasing essential inputs and completing ongoing contracts.

He noted that legal priority alone does not make rescue financing a sound banking decision, adding that post-commencement financing should be backed by clear milestones, adequate security arrangements and transparent reporting requirements.

Dr Asiama also called for stronger collaboration among insolvency practitioners, financial institutions, accountants and regulators to establish a predictable and risk-sensitive framework for rescue financing.

He said Ghana should pursue a balanced approach that preserves viable businesses without compromising financial stability.

Chairman of the event and Board Chairman of Scancom PLC (MTN Ghana), Dr Ishmael Yamson, welcomed the decline in the banking sector’s NPL ratio but expressed concern that some existing regulatory measures could discourage banks from supporting companies undergoing restructuring.

He noted that restrictions on dividends, bonuses and lending imposed on banks with elevated NPL ratios could unintentionally penalise institutions that provide post-commencement financing to distressed businesses.

Dr Yamson proposed excluding post-commencement financing from NPL ratio calculations and from the loan portfolio growth restrictions expected to take effect in January 2027 during a defined rescue period.

He argued that banks financing approved business rescue plans should not be punished by regulations designed to reduce bad loans.

While describing rescue financing as an important safety net, Dr Yamson emphasised that policymakers should prioritise strengthening businesses to prevent financial distress in the first place.

He urged regulators to adopt prudential measures that safeguard financial stability while allowing banks to provide the financing needed to preserve businesses, protect jobs and sustain economic growth.

Prince Antwi

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