Moody’s describes Ghana’s banking sector reforms as credit positive

  • Moody's said the Bank of Ghana recapitalisation within a specific timeframe needs to be commended.
  • The recapitalisation reduced banks in Ghana to 23 by 2019.
  • However Moody's argue that the banking reforms does not guarantee strong future performance for all remaining banks.

International rating agency Moody’s has commended the Bank of Ghana (BoG) for carrying out the banking sector reforms in the country within a specified time.

In its recent report on Ghana’s banking sector reforms, Moody’s said “the recapitalisation exercise’s completion within the planned timeframe shows BoG’s willingness to strictly enforce prudential regulations. Improved supervision quality and corporate governance will gradually boost confidence in the banking system.” 

“Fewer banks will likely enhance regulators’ capacity to rigorously monitor and improve the sector’s overall supervisory framework. BoG has already started to tighten the regulatory framework by issuing a corporate governance directive that will enhance banks’ corporate governance practices,” Moody’s added.

In September 2017, the BoG announced the increment of the Minimum Capital Requirement for banks from GH¢120million to GH¢400million with a December 2018 deadline.

However, some analysts and an association of indigenous banks pressurised the regulator to relax the rules for indigenous players and petitioned the presidency to intervene.

But the BoG did not give in to the requests. By January 2019, the BoG announced that only 23 banks remained standing.

Nine banks had their licenses revoked, three mergers involving six banks had happened; a voluntary exit of one bank; and the conversion of the universal licence of one to a savings and loans status for not meeting the stated capital by the deadline day.

Despite Moody’s commendation, it has also cautioned that Ghanaian banks still face challenges, and consolidation of the banking system does not guarantee strong future performance for all remaining banks.

“Asset risks in Ghana remain high, with NPLs at 20.1 percent as of October 2018. At the same time interest rates are falling, with the monetary policy rate currently at 17percent – the lowest policy rate since 2013, straining income from government securities for banks,” the report added.

But the BoG believes the measures it has put in place on corporate governance, credit analysis, and risk will reshape the industry and restore the much-needed confidence. 

Meanwhile, the BoG is also addressing specific risks from high NPLs and poor risk management systems, embarking on the roll-out of the Basel II/III supervisory framework, and ensuring implementation of IFRS 9 by all banks.


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