BoG rolls out sweeping measures to curb non-performing loans -

The Bank of Ghana (BoG) has announced a far-reaching package of prudential and regulatory measures aimed at decisively addressing the persistent challenge of non-performing loans (NPLs) in the country’s financial system.
The new rules, which will come into force in phases from January 2027, are designed to strengthen credit risk management, safeguard depositors, and improve the overall stability of Ghana’s banking and financial services sector.

At the centre of the reforms are restrictions on dividend payouts and staff bonuses for banks with high NPL ratios, mandatory write-offs of bad loans, tighter accountability rules for directors and shareholders who default, and enhanced disclosure requirements for institutions struggling with bad debts.

The measures, according to the central bank, represent a fundamental recalibration of the financial system — one intended to ensure that lenders place prudence and responsibility above short-term profits.

Summary of the new measures

The new BoG rules contain multiple layers of intervention.

First, banks and regulated financial institutions with NPL ratios above 10% will be barred from paying dividends or issuing staff bonuses, with the restrictions applying more stringently to those with NPL ratios of 15% or higher.

Microfinance institutions

For microfinance institutions, a stricter threshold of 5% has been introduced, reflecting their heightened vulnerability.

Secondly, institutions are required to write off fully provisioned loans, particularly those in the “loss” category, and in cases where repayment prospects are minimal.

This ensures that banks do not continue carrying irrecoverable loans on their books.
Thirdly, accountability measures have been introduced for directors, key management personnel, and significant shareholders.

Any insider who defaults on loans for more than 180 days will be declared unfit to continue in their role, with the central bank empowered to withdraw approvals, enforce divestiture of shares, and bar them from holding positions in the sector.

In addition, banks must now publish the names of defaulters twice yearly in newspapers and on their websites, adding a reputational deterrent to loan default.

Finally, enhanced reporting requirements mean that institutions with NPL ratios above 7% must submit monthly reports to the central bank and include detailed NPL disclosures in their annual financial statements.

Why NPLs are a persistent problem

Non-performing loans have long been one of the thorniest issues in Ghana’s financial sector.
According to BoG data, the NPL ratio peaked at 23.5% in April 2018 at the height of the banking crisis, before declining to about 14 per cent in 2020 following major reforms.

As of early 2025, NPL levels hovered around 15%, significantly above the sub-Saharan African average of about 10%.

The high levels of bad loans are attributed to multiple factors: weak credit risk assessment practices, insider lending, economic volatility, and poor corporate governance.

Banking sector cleanup

The banking sector cleanup of 2017–2019 exposed the scale of the problem, as many institutions had under-provisioned for bad loans or concealed them entirely.

The result was a weakened financial system that struggled to support private sector growth, with banks forced to hold back on lending to avoid worsening their loan books.

This created a vicious cycle: fewer loans meant slower growth, while high default rates eroded bank profitability and capital buffers.

The latest measures are therefore intended not just to deal with the current stock of NPLs but to change the culture of credit risk management permanently.

Restrictions on dividends and bonuses

One of the most visible reforms is the restriction on dividend payouts and staff bonuses for banks with high NPLs.

The central bank has made it clear that institutions cannot reward shareholders or staff while struggling with loan quality issues.

Institutions with NPL ratios between 10 and 15% will be given a two-year window to restructure, while those exceeding 15% face immediate restrictions.

The ban on dividend distributions and staff incentives is complemented by a prohibition on loan book expansion for the worst-affected institutions.

The measure ensures that profits are ploughed back into strengthening balance sheets instead of being distributed.

For depositors, this provides reassurance that banks are prioritising financial stability, while for the broader economy, it reduces the risk of institutions collapsing under the weight of bad loans.

Mandatory write-off of bad loans

Another critical component of the reforms is the requirement for banks and other financial institutions to write off fully provisioned loans that are deemed unrecoverable.

These include loans classified as “loss” under prudential guidelines, as well as “substandard” and “doubtful” exposures where repayment is unlikely.

The BoG has stressed that a write-off does not equate to debt forgiveness.

Institutions retain full legal rights to pursue repayment through collections, sales, or asset transfers.
However, by ensuring that irrecoverable loans are removed from balance sheets, the central bank is promoting transparency and efficiency.

This measure aligns Ghana with international best practices, particularly IFRS 9 standards, which require forward-looking provisioning.

It also allows investors and depositors to get a clearer picture of the actual health of financial institutions, eliminating the practice of “evergreening” bad loans.

Insider accountability and governance

Perhaps the most far-reaching reform is the BoG’s decision to target insiders who contribute to the NPL problem.

Directors, key management personnel, and significant shareholders who default on their loans for more than 180 days will no longer be allowed to continue in their roles.

The central bank will withdraw approvals for such individuals, bar them from future roles in any regulated financial institution, and force defaulting shareholders to divest their stakes.

Proceeds from such sales will be used to offset outstanding loan obligations.

This measure addresses one of the most controversial practices in Ghana’s banking history: insider lending.

The collapse of several banks during the 2017–2019 crisis was linked to reckless loans extended to directors, shareholders, or related parties, often with little chance of recovery.

By making insider accountability a central plank of its reforms, the BoG is signalling zero tolerance for conflicts of interest.

Publication of defaulters

In a move likely to generate heated debate, the BoG has mandated that banks publish the names of defaulters twice yearly in newspapers and on their websites.

The lists must be published by June 30 and December 31.

This “name and shame” approach is designed to create reputational consequences for defaulters, particularly wilful ones. It is expected to discourage strategic defaults, where borrowers with capacity to pay simply refuse to honour their obligations.

For the public, the measure introduces greater transparency and accountability.
Depositors and investors will be able to see which institutions are burdened by bad loans and who the major defaulters are.

Enhanced reporting and transparency

The BoG has also introduced tougher reporting obligations.
Any institution with NPL ratios above 7% must submit monthly reports to the central bank, disclosing NPLs by sector, details of loan write-offs, related party exposures, and recoveries on written-off loans.

Annual reports must also carry detailed disclosures, including the names of related party borrowers, the status of defaulters, and compliance with central bank directives.

This enhanced transparency is expected to improve investor confidence and allow regulators to better monitor systemic risks.

It also brings Ghana closer to international standards, where investor disclosures are used as a tool to discipline banks into improving asset quality.

How Ghana compares with other markets

Ghana is not alone in grappling with high NPLs.

In Nigeria, the central bank has introduced limits on NPL ratios and mandated strict provisioning rules.
Kenya, similarly, has tightened disclosure requirements and placed restrictions on dividend payouts for banks with weak loan books.

What makes Ghana’s reforms notable is the comprehensive nature of the package.

By combining prudential restrictions, mandatory write-offs, insider accountability, reputational measures, and enhanced transparency, the BoG is adopting a holistic approach.

Analysts suggest that if effectively implemented, Ghana could become a model for other African countries struggling with similar challenges.

Expert perspectives

Banking analysts have generally welcomed the measures described them as “a bold step that places discipline at the heart of banking.”

They noted that the ban on dividends and bonuses would “finally force banks to take loan quality seriously, rather than sweeping issues under the carpet.”

However, some industry executives have expressed concern about the impact on shareholder returns.
While acknowledging the need for discipline, they stated that investors would be cautious about committing new capital to banks if dividend payouts are uncertain.

Consumer advocates, meanwhile, have applauded the publication of defaulters’ names, arguing that it would “shine light on powerful individuals who have long hidden behind banking secrecy while defaulting on loans.”

Broader benefits to the economy

If implemented successfully, the new measures are expected to create a healthier financial system with stronger capital buffers, better loan quality, and greater transparency.

This would enhance depositor confidence, reduce systemic risks, and improve the ability of banks to lend to productive sectors such as agriculture, manufacturing, and small and medium enterprises.

In the medium term, the reforms could also lower the cost of borrowing, as institutions with cleaner balance sheets would face lower provisioning requirements and reduced risk premiums.

Ultimately, the BoG’s intervention seeks to break the cycle of weak credit culture that has plagued the sector for decades.

By insisting on prudence, transparency, and accountability, the central bank is laying the foundation for a more stable and resilient financial system capable of supporting sustainable economic growth.