Ghana’s banking sector is bracing for another major shake-up as the Bank of Ghana (BoG) moves to tighten prudential rules, compelling financial institutions to reduce their non-performing loan (NPL) ratios by the end of 2026.
The new measures, announced in August 2025, are seen as part of a broader regulatory posture shaped by the lessons of the country’s landmark 2017–2018 banking sector clean-up.
According to Fitch Ratings, the anticipated improvement in asset quality will be driven largely by accelerated loan write-offs and a more favorable operating environment. The new rules mandate that all regulated financial institutions maintain NPL ratios below 10%. Institutions exceeding 15% will face immediate restrictions on dividend and bonus payments, while those between 10% and 15% will be penalized if they fail to comply within two consecutive years.
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Fitch Ratings Findings
As of mid-2025, only four of the country’s 23 banks had NPL ratios below the 10% threshold. More than half reported ratios above 15%, underscoring the scale of the challenge. Still, Fitch believes most banks will be able to bring their NPL ratios below 15% by the end of 2026, mainly through strategic write-offs.
The agency, however, warned that six banks may struggle to meet capital adequacy requirements once regulatory forbearance tied to losses on cedi-denominated government bonds expires at the end of 2025. These banks, weighed down by problem loans and thin capital buffers, are expected to face the greatest difficulty in complying with the new rules.
Ghanaian banks have grappled with weak asset quality for more than a decade. The problem deepened during the sovereign debt restructuring launched in December 2022, which sent the sector’s NPL ratio surging to 26.7% by Q1 2024 from 14.8% at the end of 2022. Payment delays to government contractors, sluggish credit growth, and macroeconomic instability compounded the situation. By mid-2025, the ratio had only modestly improved to 23.1%.
“Most Ghanaian banks have not paid dividends in recent years due to the sovereign default and their reliance on related regulatory forbearance,” Fitch said.
The agency added that the expiration of forbearance at the end of 2025, combined with the threat of dividend restrictions, will push banks to accelerate NPL reduction.
Write-offs as the Key Tool
Encouragingly, the sector’s NPL ratio excluding fully provisioned loans stood at just 8.5% at the end of H1 2025. This suggests banks can execute substantial write-offs without triggering additional provisions. At the same time, strong pre-impairment operating profits, supported by high-yielding sovereign securities, provide a cushion to absorb new provisions without eroding capital. With net loans accounting for only 19% of total banking assets as of April 2025, write-offs are expected to be the main compliance tool.
Fitch also pointed to improving macroeconomic conditions. Ghana’s Long-Term Issuer Default Rating was upgraded to ‘B-’ with a Stable outlook in June 2025, following the country’s successful normalization of relations with most external creditors. The cedi has strengthened, inflation is projected to decline sharply, and banks are expected to benefit from a more stable operating environment.
“Improved operating conditions should help attenuate problem loan generation and support stronger loan growth,” Fitch noted, though it cautioned that persistent payment arrears to government contractors remain a significant risk.
Still, the agency observed that foreclosures and restructurings are unlikely to materially reduce NPL ratios before the new prudential limits take effect. Slow legal processes and lengthy cure periods for restructured loans remain barriers.
Lessons from the 2017–2018 Clean-up
The BoG’s tough stance on NPLs reflects a regulatory posture shaped by its 2017–2018 banking sector clean-up, one of the most consequential reforms in Ghana’s financial history. During that period, the central bank revoked the licenses of nine insolvent banks and merged others to restore stability to a sector crippled by poor corporate governance, undercapitalization, and mounting bad loans. The exercise cost the state nearly GHS 21 billion in bailouts and fundamentally reshaped the industry.
That clean-up underscored the systemic risks posed by unchecked bad loans and weak balance sheets. Regulators now appear determined to avoid a repeat of the crisis, using stricter prudential rules and credible enforcement threats—such as dividend bans and bonus restrictions—to compel banks to clean up their books before vulnerabilities metastasize.
Regional Parallels
The regulatory tightening also mirrors broader trends across West Africa. Last month, Fitch disclosed that while most Nigerian banks are expected to exit regulatory forbearance by December 2025, some may continue under forbearance, facing strict penalties, including dividend bans. The Central Bank of Nigeria, like the BoG, is pressing banks to enter 2026 with stronger capital buffers and cleaner balance sheets.
In Ghana, the new measures signal that regulators have drawn clear lessons from the past that proactive supervision and early intervention are less costly than emergency rescues.