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BoG regulations to reform banking sector

botchway March 27, 2018


By Bernice Bessey

The Governor of Bank of Ghana (BoG), Dr Ernest Kwamina Yedu Addison, says the ongoing regulation reforms in the banking sector are to promote stability of the financial system and to properly position it to support the economic growth agenda.

According to him, the banking sector continues to be profitable and solvent with some modest gains in asset quality, though there still remained some vulnerability in the sector, which the Central Bank is implementing recapitalisation plans, in line with the new minimum capital requirement.

At a media briefing on the BoG Monetary Policy Committee in Accra, Dr Addison stated that the total asset base of banks increased to GH¢95.1 billion in February 2018, which indicates an annual growth of 13.7% compared with the 15.3% recorded in December 2017.

The asset growth was mainly funded by deposits, which went up by 12.6% on year-on-year basis, and this, he explained: “The industry’s average Capital Adequacy Ratio (CAR) improved to 19.2% in February 2018, reflecting efforts by banks to recapitalise.”

He mentioned that other financial soundness indicators recorded some improvements, although the quality of loan portfolio remained a concern, since the Non-Performing Loans (NPLs) ratio had been static at 21.6%, from December 2017, with the banks continuing to clean their balance sheets.

The total public debt declined from 73.1% of GDP in December to 69.8% of GDP in December 2016 to 69.8% of GDP of GH¢142.5 billion at the end of 2017.

This comprises domestic debt of GH¢66.7 billion and external debt of GH¢75.8 billion.

“The maturity profile of domestic debt showed an increased in longer-dated instruments in line with government’s debt management strategy, particularly, the re-profiling strategy. By the end of December 2017, the share of short-dated instruments in total domestic debt had declined to 18.0 percent in December 2016, while the share of medium-term instruments rose to 63.1% from 38.1%,” he added.

The Governor continued that provisional trade data for the first two months of 2018 indicated a trade surplus of US$584.5 million (1.1% of GDP) on the back of higher export receipts from crude oil, meanwhile, the same period last year recorded a trade surplus US$494.3 billion (1.1% of GDP).

He, however, indicated that there was a drop in international reserves largely reflecting seasonal foreign exchange flows, planned sovereign bond coupon payments, and Energy Sector Levy Act (ESLA) related payments.

“As a result, Gross International Reserves (GIR) stood at US$6.9 billion (3.8 months of import cover) as at March 20, 2018, compared to US$7.6 billion (4.3 months of import cover) as at December 2017,” he said.

Dr Addison was convinced that growth prospects for 2018 remain positive and are expected to be supported by crude oil production, gradual recovery in the non-oil sector, and favourable business and consumer sentiments.

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