Dr. Johnson Asiama, the Governor of the Bank of Ghana, has urged commercial banks to implement a careful and transparent strategy when adjusting their lending rates.
During the central bank’s inaugural post-MPC meeting with the CEOs of commercial banks in Accra, Dr. Asiama emphasized the importance of considering the effects of rate increases on both businesses and households.
He encouraged financial institutions to maintain open lines of communication with their clients throughout this period of monetary tightening, ensuring that viable businesses do not face barriers to accessing credit.
“Although the tightening of policy will influence funding costs and credit pricing in the short term, the financial system is adequately equipped to handle these changes. We therefore advise banks to act prudently when adjusting lending rates and to keep clients informed,” he stated.
Recognizing the potential impact on businesses and households, he called on banks to provide targeted financial assistance to struggling sectors.
“The increase in the policy rate also enhances external buffers, supports the cedi, and demonstrates our commitment to macroeconomic stability amid rising global uncertainties. However, we acknowledge that this rate hike will raise borrowing costs for both businesses and households. It is essential that viable businesses continue to receive support, and that customized solutions are developed to alleviate the effects on the most vulnerable sectors,” he added.
This statement follows the recent decision by the Bank of Ghana to raise the policy rate by 100 basis points to 28%, marking the first increase since September 2024.
Dr. Asiama emphasized that the decision was intended to strengthen the disinflation process, which, although in progress, is still too slow to ensure enduring stability. The reduction in headline inflation from 23.8 percent in December to 22.4 percent in March indicates that recent policy measures are producing the desired results. Nevertheless, inflation expectations remain high, and core inflation continues to exceed the medium-term target.
Outlook and Concerns in the Banking Sector
In light of recent difficulties, the Governor of the Bank of Ghana, Dr. Johnson Asiama, conveyed a sense of cautious optimism regarding the banking sector’s condition. He pointed out that, even without relief measures, the sector has demonstrated consistent improvement, attributed to advancements in solvency, asset quality, liquidity, and profitability.
However, Dr. Asiama raised concerns about ongoing solvency challenges in certain domestically controlled and state-owned banks, where the path to recapitalization is still uncertain.
“Addressing these capital deficiencies is a top priority,” he remarked. “We are collaborating closely with the affected institutions to achieve sustainable capital levels, restore depositor confidence, and ensure full compliance with regulatory standards.”
Introduction of New Framework to Enhance Banking Sector Resilience
Dr. Johnson Asiama also revealed plans to improve the central bank’s supervisory and crisis management capabilities.
A key component of this initiative is the forthcoming introduction of a Resolvability Assessment Framework, aimed at ensuring that banks are well-capitalized and adequately prepared for distress situations—especially in an increasingly interconnected financial environment.
He noted that this framework is informed by lessons learned from previous bank resolutions and is part of a comprehensive strategy to enhance crisis preparedness.
“To cultivate genuine resilience, we must transition decisively from traditional, reactive supervision to a more proactive, risk-sensitive, and system-aware approach,” the Governor asserted.
Dr. Asiama reiterated the Bank’s dedication to fostering the sector by implementing effective policies, encouraging open dialogue, and promoting collaboration, with the goal of creating a more inclusive and stable financial ecosystem that serves the needs of all Ghanaians.
