Ghana’s banking sector is poised for a big shift as new rules from the Bank of Ghana (BoG) compel monetary establishments to cut back their non-performing mortgage (NPL) ratios by the top of 2026.
Based on Fitch Rankings, the anticipated enchancment shall be pushed primarily by accelerated mortgage write-offs and a extra favorable working setting.
The BoG’s revised prudential pointers, introduced in August 2025, mandate that every one regulated monetary establishments preserve NPL ratios under 10%. Establishments exceeding 15% will face speedy restrictions on dividend and bonus funds, whereas these with ratios between 10% and 15% shall be penalized in the event that they fail to conform inside two consecutive years.
Fitch Rankings Findings
Fitch Rankings revealed that, as of mid-2025, solely 4 out of 23 banks had NPL ratios under the ten% threshold. Greater than half of the banks reported ratios above 15%, underscoring the size of the problem. Nonetheless, Fitch believes that the majority banks will be capable of convey their NPL ratios under 15% by the top of 2026, largely via strategic write-offs.
Nevertheless, the scores company cautioned that six banks might battle to fulfill capital adequacy necessities as soon as regulatory forbearance associated to losses on cedi-denominated authorities bonds expires on the finish of 2025. These establishments, burdened by excessive ranges of downside loans and restricted capital buffers, are anticipated to face the best problem in attaining compliance.
Ghanaian banks have grappled with weak asset high quality for over a decade, a scenario exacerbated by the sovereign debt restructuring initiated in December 2022. The sector’s NPL ratio surged to 26.7% by the top of Q1 2024, up from 14.8% on the shut of 2022, pushed by macroeconomic instability, cost delays to authorities contractors, and sluggish credit score development. By mid-2025, the ratio had solely modestly declined to 23.1%.
“Most Ghanaian banks haven’t paid dividends in recent times as a result of sovereign default and their reliance on associated regulatory forbearance,” Fitch famous. The company added that the expiration of forbearance on the finish of 2025, coupled with the specter of dividend restrictions, would function a powerful incentive for banks to cut back their NPL ratios.
Write-offs Will be Executed With out Triggering Further Provisions
- Encouragingly, the sector’s NPL ratio, excluding absolutely provisioned loans, stood at simply 8.5% on the finish of H1 2025. This implies that substantial write-offs will be executed with out triggering extra provisions.
- Furthermore, sturdy pre-impairment working earnings, bolstered by giant holdings of high-yielding sovereign securities, supply a cushion to soak up new provisions with out eroding capital.
- Notably, web loans accounted for less than 19% of complete banking belongings as of April 2025, indicating that write-offs would be the main mechanism for attaining compliance.
Enhancing Macroeconomic Circumstances
Fitch additionally highlighted enhancing macroeconomic circumstances in 2025. The company upgraded Ghana’s Lengthy-Time period Issuer Default Score to ‘B-’ with a Secure outlook in June, following the nation’s profitable normalization of relations with most exterior collectors. The Ghanaian cedi has appreciated considerably, and inflation is projected to say no sharply, making a extra steady setting for banks.
“Improved working circumstances ought to assist attenuate downside mortgage era and assist stronger mortgage development,” Fitch acknowledged. Nevertheless, the company warned that dangers stay, notably on account of persistent cost arrears to authorities contractors.
Regardless of these enhancements, Fitch famous that foreclosures and restructurings are unlikely to materially scale back NPL ratios earlier than the brand new prudential limits take impact. Authorized proceedings stay gradual, and restructured loans sometimes require prolonged remedy intervals earlier than they are often reclassified as performing.
What You Ought to Know
- Final month, Fitch Rankings disclosed that whereas most Nigerian banks are anticipated to exit the regulatory forbearance regime by December 2025, a choose few will proceed working beneath forbearance past the interval.
- Although no particular bank was talked about, the credit standing company added that this shall be topic to stringent penalties, together with a prohibition on dividend funds.
- This growth comes amid broader efforts by the Central Bank of Nigeria (CBN) to strengthen monetary stability and guarantee banks enter 2026 with stronger capital buffers and cleaner steadiness sheets.
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