BOG worried about high NPL

The Central Bank has noted that it is taking steps to encourage banks to write off ‘loss’ accounts which assume a 100 percent provisioning that tend to overstate their true Non-Performing Loan levels.

Millison Narh, Deputy Governor of the Bank of Ghana, who made this known, was delivering the keynote address at the 13th annual working luncheon of the Ghana Association of Bankers (GAB) Thursday in Accra.

“There are some concerns to us at the Bank of Ghana like the persistently high level of NPL ratio compared to other peer countries. As at June 2013, the NPL ratio was 12.8 percent down from 13.2 percent in June 2012. Although the rates are on the downward trend, they are still high.”

He said there was the need to apply strict provisioning rules on overdraft facilities which are prone to what he termed ever-greening than ordinary term loans.

Others include the build-up of unclaimed deposit balances or dormant accounts on banks’ books, concentration risk on both sides of the balance sheet.

Also, the deputy Governor said there should be transparent regulatory issuances on mergers and acquisitions, internal controls, external auditors and updating manual of accounts and reposting requirements.

Mr Narh stated also that base rates have declined by about three percent, adding that the credit bureau system and the collateral registry should help improve the environment and further lower NPLs in the banking industry.

Furthermore, he said the new minimum paid capital for major banks has been revised to GH¢120 million while that for non-bank financial institutions has been increased to GH¢15 million from GH¢7 million. The paid capital of rural banks has been upped to GH¢300,000.

According to Mr Narh, “These increases are necessary in order to provide our institutions with the muscle to undertake big-ticket deals to support the growth of the private sector and to further serve as a capital cushion for absorbing unexpected losses that may arise in the normal course of business. Simon Dornoo, Managing Director (MD) of GCB Bank Limited, was endorsed as new president of the Ghana Association of Bankers.

He takes over from Asare Akuffo, MD of HFC Bank.

Mr Dornoo pledged to work with the Bank of Ghana to sanitize and energize the banking industry to serve Ghanaians effectively.