Banks strong and well-positioned to withstand mild, credit shocks – BoG

As far as monetary and banking sector developments are concerned, the Bank of Ghana says the latest stress tests conducted in April 2020 suggest that banks are “strong and resilient and are well-positioned to withstand mild to moderate liquidity and credit shocks on the basis of strong capital buffers and high liquidity positions”.

Announcing the maintenance of the policy rate at 14.5 per cent at the central bank’s monetary policy committee meeting on Friday, 15 May 2020, Bank of Ghana Governor Dr Addison said: “Capital Adequacy Ratio is well above the revised regulatory floor of 11.5 per cent”.

However, he noted, the industry nonperforming loan ratio has “inched up during the quarter, reflecting the emerging impact of the [COVID-19] pandemic on low credit growth and higher loan provisioning”.

So far, he noted, “banks are also responding positively to the recently-announced policy initiatives to support the economy by reducing lending rates and supporting credit growth, as well as offering moratoriums on loan repayments to cushion customers”.

The Governor, however, pointed out that the three-week lockdown imposed by the government as part of measures to control the spread of the virus, “resulted in a decline in currency as consumers resorted to the use of electronic modes of payment”.

General economic uncertainty, he observed, “reduced demand for credit, as commercial banks tightened their credit stance”.

As a result, “credit to the private sector remained virtually flat during the period”, Dr Addison told journalists, adding: “Broad money supply (M2+) slowed significantly to 13.5 per cent in March 2020, compared with 21.6 per cent growth a year ago”.