Latest indicators in the banking sector show banks are more financially sound now than before the banking reforms were carried out, the Bank of Ghana (BoG) has maintained.
The bank, at its latest Monetary Policy Committee (MPC) briefing in Accra, disclosed that the total assets of all 23 banks had increased to GH¢115.2 billion at end August 2019 from GH¢89.1 billion in August 2017 for a sector that then had 36 banks.
“Total deposits have improved from GH¢55.7 billion to GH¢76.0 billion over the same comparative period, reflecting a stronger deposit base owing to more trust and confidence in the banking sector with fewer but stronger banks,” governor of the bank, Dr Ernest Addison stated.
Dr Addison said the industry’s Capital Adequacy Ratio (CAR) stood at 19.8 per cent in August 2019, “well above the 13 per cent minimum regulatory benchmark.”
Asset quality continued to improve with a decline in the Non-Performing Loans (NPL) ratio from 21.3 per cent in August 2018 to 17.8 per cent in August 2019.
Excluding loans in the ‘loss’ category, however, the NPL ratio had declined from 11.7 per cent to 8.9 per cent over the same period.
“The NPL ratio is trending in the right direction and is expected to be sustained by continued implementation of the NPL write-off policy, intensified loan recovery efforts, and stronger credit risk management practices,” Dr Addison said.
Policy rate maintained
The governor, who announced the decision of the MPC to keep the policy rate at 16 per cent (for the fourth time running), told reporters the banking sector was well-capitalised, solvent, liquid, efficient and profitable with improved financial soundness indicators.
According to him, “Banks are beginning to refocus on their core mandate of financial intermediation based on the strong capital base after recapitalisation.
“The latest assessment shows marked improvement in banks’ performance, which is reflective of the positive impact of the recent reforms,” Dr Addison stressed.
On the way forward, the governor said the medium-term outlook is expected to be driven by improvements in business sentiments, and expectations of increased production in the oil and gas and mining sectors, and the continued implementation of growth-oriented government flagship projects.
Rising govt expenditure worrying
Dr Addison pointed out that the country’s fiscal situation remained a major concern, adding that strengthened efforts would be needed to close the deficit gap.
“The committee was concerned about the continued revenue weakness which requires expenditure adjustments to contain a larger than projected budget deficit; this will help underpin investor confidence in the Ghanaian economy and reduce the burden on monetary policy,” he stated.
The bank was confident that the full implementation of the new tax measures would impact revenue performance in the last quarter to help achieve the fiscal deficit target set for the year.