BoG to roll out new reforms to tackle credit risk and strengthen liquidity

The Bank of Ghana is set to introduce a new framework aimed at managing interest rate risks in the banking sector.

This framework is part of a comprehensive package of measures aimed at strengthening the resilience of the banking sector, enhancing transparency, and aligning Ghana’s financial system with the highest international standards.

Speaking at the opening of a meeting with Heads of banks, Dr. Johnson Asiama said the BoG will also introduce regulatory measures targeted at credit risk, liquidity, and reserve requirements of commercial banks.

He stressed that the move will help detect vulnerabilities early and put in place protective measures as credit access expands on the back of recent cuts in the policy rate and lending rates.

‘We will also introduce a framework for managing interest rate risk in the banking book, strengthen capital planning through the Internal Capital Adequacy Assessment Process, and embed more robust stress testing to ensure early detection of vulnerabilities,’ he said.

On credit and risk governance, Dr. Johnson Asiama noted that, ‘all banks will be required to identify and take firm action against deliberate defaulters to ensure that credit obligations are honoured.’

‘A new Credit Risk Management Directive, aligned with Basel principles, will set minimum standards for underwriting, monitoring, and provisioning. Alongside this, we will introduce a Bancassurance Directive to strengthen governance in bancassurance arrangements, a Large Exposures Directive to limit concentration risk, and new guidelines on credit concentration to encourage greater diversification across loan portfolios, he added.

On liquidity and capital resilience he said, ‘the forthcoming Liquidity Risk Management Directive will mandate that banks hold sufficient High-Quality Liquid Assets to cover 30-day stress scenarios. This measure will also close loopholes that have allowed the artificial reduction of reserve requirements, including the misclassification of deposits as borrowings, and will clarify the treatment of e-money float accounts.

In the area of market conduct and foreign exchange compliance, Dr. Asiama said the Central Bank will tighten enforcement of the Foreign Exchange Act and the Guidelines for Inward Remittance Services.

“This means there will be no use of unapproved channels for remittance terminations, no FX swaps within remittance operations, no remittance terminations without Bank of Ghana approval, and no application of unprescribed FX rates. Effective immediately, all banks and payment service providers must submit weekly inward remittance reports detailing transactions and FX credits to Nostro accounts,’ he said.

According to the central bank, these reforms form a single, coherent regulatory framework that not only enforces compliance with existing rules but also positions Ghana’s banking sector to withstand future shocks, compete globally, and play a stronger role in driving sustainable economic growth.

As Ghana now enjoys a stable macroeconomic foundation, Governor Dr. Johnson Asiama urged the heads of bank to translate stability into growth by channeling more credit into productive enterprises, supporting SMEs, financing critical infrastructure, and embracing digital innovations to reach underserved markets.

“This will require sound risk governance, unwavering compliance, and the courage to rethink business models in light of changing customer needs, technological disruption, and climate and sustainability challenges,” Dr. Asiama said.