BTA2023 The Bank of Ghana (BoG) has announced plans to integrate business model analysis into its routine supervisory framework, marking a significant shift toward more forward-looking financial sector oversight.
Governor Johnson Pandit Asiama revealed the policy direction during a post–Monetary Policy Committee engagement with bank chief executives in Accra, stating that the move is aimed at strengthening early detection of structural risks within Ghana’s banking sector.
Shift from Compliance to Forward-Looking Supervision
The decision follows a thematic review of banks’ funding structures, asset allocation patterns, earnings composition, and governance effectiveness under both baseline and stress scenarios.
While the review confirmed that Ghana’s banking sector remains viable and profitable, it identified structural vulnerabilities requiring closer regulatory scrutiny as macroeconomic conditions normalize.
“Business model analysis will now form an embedded part of supervisory assessment,” Dr. Asiama said, noting that the approach would enable earlier identification of emerging risks and allow for timely supervisory intervention.
Unlike traditional compliance-based supervision, the new framework will evaluate:
- Sustainability of revenue streams
- Concentration risks
- Governance structures
- Resilience under varying macroeconomic scenarios
- Sensitivity to interest rate cycles
Profitability Under Pressure from Margin Compression
BoG’s review revealed that approximately 68% of industry profitability is driven by net interest income, making banks highly sensitive to interest rate movements and sovereign exposure dynamics.
The sector’s net interest margin declined from 14.2% in December 2024 to 11.5% by December 2025, following a reduction in the Monetary Policy Rate from 27% to 18% over the same period.
Although return on equity remained elevated at 30.8% at year-end 2025, the compression in spreads highlights growing structural dependence on interest income — a vulnerability as Ghana transitions into a lower-rate environment.
Governor Asiama emphasized that future earnings resilience will increasingly depend on diversification into fee-based and transactional services.
Credit Allocation and Asset Concentration Concerns
Financial intermediation remains modest. Loans account for less than one-fifth of total industry assets, with total advances standing at GH¢111 billion against total assets of GH¢446.9 billion as of December 2025.
Banks continue to maintain elevated exposure to sovereign and central bank instruments, reflecting a preference for government securities over private sector lending.
Private sector credit growth struggled for much of 2025, with real credit contracting to -7.3% in May before rebounding to 13.1% by December as interest rates eased.
Stronger Capital Buffers Provide Stability
Despite structural concerns, the banking sector enters this new supervisory phase from a position of strengthened capital.
The Capital Adequacy Ratio improved from 14% at end-2024 to 17.5% by December 2025, even after stripping out regulatory reliefs. Non-performing loans declined from 21.8% to 18.9% over the same period, though they remain above benchmark levels.
The macroeconomic backdrop has also improved significantly. Real GDP grew by 6.1% in the first three quarters of 2025, inflation fell sharply to 3.8% in January 2026 from 23.8% a year earlier, and exchange rate stability has improved.
With monetary policy easing and lending rates gradually declining, BoG expects credit growth to strengthen. However, the central bank is determined to avoid a repeat of past credit expansion cycles that led to asset quality deterioration.
As Governor Asiama concluded: “Stability must now translate into purposeful intermediation.”
