Banks face heightened credit risk in rising NPLs – BoG

With the Covid-19 pandemic raging on, the Bank of Ghana says banks in Ghana face heightened credit risk as depicted in rising non-performing loan ratios and this is of great concern to banks, supervisors, and macroeconomic policy makers.

“What is more, the full extent of banks’ credit risk cannot be assessed with any high degree of certainty given the uncertain economic outlook in the midst of the pandemic and the fact that many reliefs granted by banks to borrowers at the onset of the pandemic remain in force. The impact of the pandemic on supervisors’ ability to conduct on-site examination of banks is another key concern, given the limitations of off-site loan book reviews”, Second Deputy Governor of the Bank of Ghana, Elsie Addo-Awadzi disclosed at the Bank of Ghana/ Bank of England Regional Event on the theme “Microprudential Supervision of Credit Risk”.

This, she said, the regional training event therefore provides a great opportunity for bank supervisors in Africa to discuss common challenges and identify common solutions that work for the region, while learning from some of the experiences of the Bank of England and other advanced Supervisory Authorities.

On the part of Ghana, Mrs. Addo-Awadzi said the Bank of Ghana’s banking sector reforms over the last several years have helped to cushion banks somewhat against the impact of the pandemic.

“As we look ahead in an uncertain economic future, it is my hope that the peer learning from this training event will help supervisors in Africa to improve the quality of microprudential supervision of banks’ credit risk, and help to better promote the stability and resilience of Africa’s banking system”, she explained.

She further said that the theme for this three-day event – Microprudential Supervision of Credit Risk – has always been critical in promoting the safety, soundness, and resilience of the banking sector, a  number of factors account for high credit risk faced by banks in Africa. These include poor credit underwriting standards by some banks, weak credit market infrastructure such as credit reporting systems, challenges in loan enforcement in the face of defaults, and macroeconomic challenges that impact the real sector, among others.

The regional events will help to build the supervisory capacity of Central Banks in the region through peer learning, as well as finding cutting-edge solutions to supervisory concerns.

Source: Myjoyonline