BoG announces new set of regulatory measures to check NPLs

The Bank of Ghana has announced a new set of regulatory measures to check high Non-Performing Loans (NPLs) in banks and other financial institutions in the country.

The Central Bank, in a statement, said this action is in response to dealing with increasing risks to the industry’s profitability, liquidity, and solvency, as well as threats to the stability of the financial system.

The Bank of Ghana, in a notice, added that this action is to re-emphasise existing prudential guidance and highlight additional measures in line with international best practices for managing credit risks.

Maintaining a Robust Credit Risk Management Framework

The Bank of Ghana said this measure will ensure that the banks and other financial institutions will maintain credit risk management requirements and demonstrate the robustness to the regulator.

Observing of Prudential limit on Non-Performing Loans

The Central Bank said this measure will ensure that the levels of Non-Performing Loans to gross loan ratio do not exceed 10% or such levels as may be prescribed by the regulator.

It, however, said microfinance Institutions are required to comply with their existing prudential limit on non-performing loans.

Write off all Fully Provisioned Loans and Loans with No Realistic

It said this action will ensure that all the regulated financial institution, with prior written approval from the Bank of Ghana shall immediately write off NPLs in the loss category, as per the BoG prudential loan classification and provisioning norms, as well as those in the substandard and doubtful categories where there is no reasonable expectation of recovering contractual cashflows promptly.

Read More