The Bank of Ghana (BoG) has directed regulated financial institutions to bring their non-performing loan (NPL) ratios down to no more than 10% by the end of December 2026, putting renewed pressure on banks to tighten lending standards, recover outstanding debts and clean up fully impaired loans.
The directive comes as the banking sector records a significant improvement in asset quality. According to BoG Governor Dr Johnson Pandit Asiama, the industry’s NPL ratio fell from 23.10% in June 2025 to 16.10% in June 2026.
Despite the sharp decline, the Governor said the current level remains unacceptably high.
Speaking at a Bank of Ghana and Chartered Institute of Restructuring and Insolvency Practitioners Ghana (CIRIP Ghana) forum on non-performing loans and post-commencement financing, Dr Asiama said the progress recorded so far should not create complacency.
“But that is progress, not sufficiency, and 16.10% remains too high,” he said.
The banking sector’s Capital Adequacy Ratio, meanwhile, stood at 20.40%, indicating that banks continue to maintain capital buffers above regulatory requirements.
Under the new push to reduce bad loans, financial institutions are expected to implement board-approved NPL reduction plans, strengthen credit appraisal and loan recovery systems, and write off fully provisioned loans where there is no realistic prospect of recovering the money.
The BoG’s latest position also comes amid efforts to develop a stronger financing framework for businesses facing financial distress but still considered capable of recovery.
Ghana’s Corporate Insolvency and Restructuring Act, 2020 (Act 1015), provides a framework for distressed companies to undergo restructuring rather than automatically being liquidated. The law also gives post-commencement financing statutory priority, potentially making it more attractive for lenders to provide fresh funds to companies under administration.
However, Dr Asiama cautioned banks against assuming that legal priority automatically makes a distressed company a safe investment.
“The priority that Act 1015 confers on post-commencement financing materially improves the position of a lender advancing funds after administration begins,” he said.
“But legal priority alone does not make a transaction prudent or bankable. It does not make the cash flows appear, and it does not guarantee repayment.”
According to the Governor, banks must first establish whether new financing can realistically return a distressed company to sustainable operations.
Some businesses may still have productive assets, customers and viable contracts but lack the working capital needed to purchase inputs, retain workers or complete projects while undergoing restructuring.
For such businesses, fresh financing could make the difference between recovery and collapse. But the BoG says funding should only be provided where there is a credible path to repayment.
Banks are therefore expected to examine the quality of available information, the assumptions underpinning the restructuring plan, the capability of management, corporate governance arrangements and the company’s prospects for generating sustainable cash flow.
They must also consider what caused the original financial distress, how creditors will be treated and what shareholders and management are contributing to the rescue effort.
A major concern for the central bank is the possibility that banks could use restructuring or fresh financing to make troubled loans appear healthier without addressing the underlying losses.
Dr Asiama made it clear that granting a new facility does not wipe away an existing impaired loan.
“The existing impaired facility must remain properly recognised, classified and provided for,” he said.
“Calling an exposure post-commencement financing cannot convert a weak loan into a good one.”
He added that there would be no blanket exemption from IFRS 9 accounting requirements or prudential rules, and no automatic favourable classification simply because a new facility was granted after administration had begun.
The position is intended to ensure that banks continue to recognise legacy losses while assessing any new financing separately on its own commercial merits
The BoG is also encouraging banks to put safeguards around any fresh money provided to distressed companies.
Depending on the circumstances, new financing could be ring-fenced for specific operational needs, paid directly to approved suppliers or managed through controlled accounts.
Lenders may also require adequate security, clearly defined restructuring milestones, regular financial reporting and exit triggers that allow them to act if a company’s recovery plan begins to fail.
The measures are part of a broader effort to prevent the practice of continually extending or restructuring troubled loans simply to avoid recognising losses.
Dr Asiama said reducing bad loans is important not only for the stability of individual banks but also for Ghana’s wider economic growth.
“High non-performing loans tie up capital, raise recovery costs and restrict new credit, most severely for smaller and higher-risk borrowers,” he said.
“Reducing them is therefore not merely a supervisory concern; it is part of Ghana’s development agenda.”
The Governor said Ghana should not have to choose between liquidating every financially distressed business and weakening banking regulations to keep struggling companies alive.
Instead, he argued for a restructuring system that can preserve businesses that are genuinely viable while ensuring that banks continue to recognise losses and protect financial stability.
The Bank of Ghana is working with CIRIP Ghana, the Ghana Association of Banks, the Institute of Chartered Accountants Ghana and other stakeholders to develop a more predictable framework for post-commencement financing.
The framework is expected to provide clearer guidance on how banks should assess commercial viability, structure and monitor new financing, and treat existing and new exposures under IFRS 9 and prudential regulations.
It is also expected to clarify how risks should be shared among lenders, shareholders, insolvency practitioners, company management and existing creditors.
For the BoG, the goal is not to eliminate the risks associated with lending to distressed businesses but to ensure those risks are properly assessed, priced and managed.
“Business rescue and financial stability are compatible objectives,” Dr Asiama said, stressing that rescue efforts must be based on commercial viability, transparency and accountability rather than concealed losses or regulatory forbearance.
