The Bank of Ghana’s latest Banking Sector Report reveals that the Non-Performing Loans (NPLs) ratio remains high, and this is in spite of measures taken by the central bank to sanitise the banking sector. According to the report, the stock of NPLs increased from GH¢7.15billion as at the end of April 2017 to GH¢8.63billion in April 2018, which is deemed a new record high. The high ratio of NPLs in the banking sector has seen a number of commercial banks fold-up and be declared insolvent – much to the surprise of depositors. In a bid to stem situations wherein it has had to intervene and either dissolve banks – or place them under administration as was the case with uniBank – the central bank introduced a number of measures, such as increasing the stated capital from GH¢120million to GH¢400million among others, to restore sanity in the sector.
This means the central bank will have to take its supervisory role more seriously and monitor the books of these banks to ensure they do not exceed their limits and accord loans that cannot be redeemed.
It is well and commendable that the BoG has introduced guidelines and regulatory measures, such as publication of the corporate governance directive in April this year to ensure stronger corporate governance as well as risk management practices.
The BoG will have to monitor closely the performance of these entities so that it can issue alerts early enough, and so measures can be put in place before the inevitable happens and puts depositors at risk. We are confident that the measures being adopted will ensure that the high ratio of NPLs in the banking sector will be reduced in the medium- to long-term; hence, it would be a bit hasty to conclude that the measures are ineffective.
It is probably a roll-over from the previous dispensation – and should not send shivers down our spines just yet.