The Bank of Ghana (BoG) has directed banks and other regulated financial institutions to reduce their non-performing loan (NPL) ratios to 10 percent or below by December 2026, as it intensifies efforts to strengthen asset quality and improve credit delivery to the private sector.
Governor Dr. Johnson Pandit Asiama announced the deadline during the Bank of Ghana and Chartered Institute of Restructuring and Insolvency Practitioners (CIRIP) Ghana Forum on Non-Performing Loans and Post-Commencement Financing in Accra on Tuesday.
The directive comes as the banking sector records a notable improvement in loan quality, with the industry’s NPL ratio declining to 16.1 percent in June 2026 from 23.1 percent a year earlier, while the Capital Adequacy Ratio reached 20.4 percent.
While describing the progress as encouraging, Dr. Asiama stressed that the current NPL level remains unacceptably high and continues to constrain lending.
“Our regulatory measures require each regulated institution to reduce its ratio to no more than 10 percent by the end of December 2026,” he said, citing stronger credit appraisal standards, board-approved NPL reduction plans, enhanced recovery functions and the write-off of fully provisioned exposures with no realistic prospect of recovery.
According to the Governor, high NPLs tie up capital, increase recovery costs and ultimately limit the flow of new credit, particularly to smaller and higher-risk businesses.
“Reducing them is therefore not merely a supervisory concern; it is part of Ghana’s development agenda,” he added.
Dr. Asiama’s remarks came against the backdrop of growing discussions on post-commencement financing under the Corporate Insolvency and Restructuring Act, 2020 (Act 1015), which allows distressed but viable companies undergoing administration to access new financing.
He acknowledged that the law provides statutory priority for lenders that extend fresh funding after a company enters administration, but warned that such provisions must not be used to conceal existing losses or weaken prudential standards.
“There can be no blanket exemption from IFRS 9 or from prudential requirements, and no automatic favourable classification simply because a facility was granted after administration commenced,” he stated.
He emphasized that existing impaired loans must remain properly recognised and provisioned, regardless of whether new financing is extended to support a restructuring process.
“Calling an exposure post-commencement financing cannot convert a weak loan into a good one,” he said.
The Governor argued that successful business rescue begins with a rigorous assessment of whether a distressed company remains commercially viable.
While some firms may face temporary liquidity challenges due to cash-flow disruptions, changing market conditions or payment mismatches, he said access to additional financing should depend on a credible recovery plan capable of restoring sustainable operations.
“A business may be distressed without being fundamentally unviable,” he noted.
However, he stressed that lenders must examine the causes of distress, the quality of management, the reliability of financial information, projected cash flows and the feasibility of proposed restructuring measures before committing fresh funds.
“A rescue plan that is to be treated as bankable must be built to be read by a credit committee,” he said.
Dr. Asiama called for a predictable and risk-sensitive framework for post-commencement financing, noting that banks, insolvency practitioners, shareholders and creditors all require clarity on how such financing should be structured and monitored.
He suggested that facilities could be ring-fenced for specific operational purposes, channelled through controlled accounts, paid directly to approved suppliers and tied to clear performance milestones and exit triggers.
The Bank of Ghana, he said, is collaborating with CIRIP Ghana, the Ghana Association of Banks, the Institute of Chartered Accountants Ghana and other stakeholders to develop practical guidance around business rescue financing.
He urged organisers to submit a consolidated report of recommendations from the forum to support the development of a coordinated national framework.
Concluding, Dr. Asiama said Ghana must strike a balance between preserving viable businesses and safeguarding financial stability.
“Our objective is not a system that avoids risk. Such a system would finance nothing worth financing,” he said. “It is a system that understands risk, prices it properly, manages it actively and holds the capacity to absorb losses when judgement proves wrong.”
By: Christian Akorlie / businesspostonline
