By Joshua Worlasi AMLANU, [email protected]
The Bank of Ghana has warned commercial banks that heavy reliance on sovereign instruments and interest income could weaken earnings as interest rates decline, even as macroeconomic conditions improve.
BoG Governor, Dr. Johnson Pandit Asiama told bank chief executives after the 128th Monetary Policy Committee meeting that stability has largely been restored, but the next phase requires structural adjustments in business models.
The central bank last month cut its benchmark policy rate by 250 basis points to 15.5 percent, citing faster-than-expected disinflation and anchored expectations. Inflation slowed from 23.8 percent in December 2024 to 3.8 percent in January 2026 — the lowest level since Ghana adopted inflation targeting. Real GDP expanded 6.1 percent in the first three quarters of 2025, supported by services and agriculture.
Falling policy rates have triggered a sharp decline in money market yields. Last week marked a third consecutive week of compression across the Treasury bill curve. The 91-day bill fell 136 basis points to 8.61 percent, the 182-day to 10.68 percent, and the 364-day to 11.06 percent. At the start of 2026, the same tenors stood at 11.12 percent, 12.55 percent and 12.93 percent, respectively.
The rapid decline in yields has reduced government funding costs but raises questions about bank profitability in a lower-rate environment.
A thematic review conducted by the central bank found that loans account for less than one-fifth of total industry assets, while asset concentration in sovereign and central bank instruments remains elevated. About 68 percent of industry profitability is driven by net interest income.
“There is nothing inherently problematic about net interest income,” Dr. Asiama said. “However, a high dependence on it increases sensitivity to interest rate cycles and sovereign exposure dynamics.”
He said as margins compress, banks will need to diversify revenue streams toward transactional banking, trade services, payments, Treasury operations and other fee-based income lines that are less balance sheet intensive.
The governor also cautioned that although non-performing loans have declined, they remain above benchmark levels. As credit growth resumes, underwriting discipline and sectoral risk assessment will be critical to prevent a fresh build-up of asset quality risks.
“Stability must now translate into purposeful intermediation,” he said, urging banks to expand lending to agriculture, manufacturing and small businesses without weakening risk standards.
The central bank will embed business model analysis into its supervisory framework to identify vulnerabilities early and enable timely intervention. It also flagged operational risks. A recent review of banks’ security operations centers showed 87 percent maintain continuous 24-hour monitoring, though some institutions still have gaps in log reporting and coverage.
Beyond balance sheet adjustments, the governor pointed to institutional reforms. Parliament has passed the Bank of Ghana Amendment Act 2025, strengthening operational independence and accountability. The Virtual Asset Service Providers Act has also been enacted, bringing digital asset activities under formal oversight.
“We are not creating a parallel financial system. All we are doing is extending the perimeter of the existing one,” the Governor said, noting that banks will interact with virtual asset providers through settlement accounts and compliance systems.
The central bank has also inaugurated a steering committee with regulators and market institutions to encourage more banks to list on the Ghana Stock Exchange, broadening ownership and deepening governance standards.
With inflation easing, reserves building and fiscal consolidation underway, Ghana’s macro backdrop has strengthened. But the central bank signaled that the durability of the recovery will depend on how quickly banks recalibrate their models away from sovereign-driven income toward diversified and productive intermediation.
A shift from resilience to structural reform, Dr. Asiama said, will define the next phase of the sector’s development.
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