A report co-authored by Dr Richmond Atuahene and Isaac Kofi Agyei, has urged the Bank of Ghana (BoG) and commercial banks to make drastic efforts to reduce the current Non-Performing Loan (NPL) ratio from 24% to around 10% to fortify the banking sector’s resilience.
The report, ‘Thirsty Banks: 2023 Ghana’s Dilemma with High Cash Reserve Ratios’ argued that any developing or emerging economy with an NPL ratio exceeding 20% is deemed to be in crisis.
“The Bank of Ghana and commercial banks need to exert significant effort to reduce the current Non-Performing Loan (NPL) ratio from 24% to around 10% to fortify the banking sector’s resilience. A resilient banking sector encompasses more than just profitability; high NPLs can lead to poor capitalization among banks, liquidity challenges, and even insolvency for some institutions.
“The Bank of Ghana’s MPC report in March 2024 affirmed these concerns, indicating a mixed outlook on key financial soundness indicators,” the report recommended in part.
The report also recommended that the “Bank of Ghana should reconsider reducing the mammoth cash reserve ratios by taking into account the GHS50.6 billion of customers' deposits used to purchase restructured government bonds with an extended maturity period until 2031.”
-Citinewsroom
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