The Governor of the Bank of Ghana, Dr. Johnson Asiama, has delivered a firm message to the country’s banking industry: the era of aggressive lending followed by painful impairments must not be repeated.

Speaking at the 128th post Monetary Policy Committee meeting with heads of banks, Dr. Asiama acknowledged that the sector has made measurable progress. Non-performing loans have declined and macroeconomic conditions are gradually stabilising. Yet he cautioned that this progress remains fragile and must be protected through disciplined credit practices.

“While non-performing loans have declined they remain above benchmark levels. As credit expansion resumes underwriting discipline and sectoral risk assessment will be critical.”
Dr. Johnson Asiama

His warning comes at a time when confidence is slowly returning to the financial system. However, the Governor made it clear that stability should not be mistaken for a green light to relax risk controls.

NPLs Still Above Benchmark

Although asset quality indicators have improved, non-performing loans remain above acceptable benchmark levels. According to Dr. Asiama, this remains a structural concern for the industry.

Over the past several years, Ghana’s banking sector has experienced cycles of rapid credit growth that were later followed by rising impairments and weakened balance sheets. These episodes eroded investor confidence and required significant regulatory intervention.

The Governor stressed that banks must learn from those experiences. Credit expansion in a stabilising macroeconomic environment presents an opportunity to support economic recovery, but only if it is guided by sound underwriting standards and rigorous sectoral risk assessment.

Without discipline, he suggested, the industry could easily fall back into the same pattern of aggressive lending that eventually leads to asset quality deterioration.

From Stability to Structural Strength

Dr. Asiama emphasised that the task ahead for banks is not simply to grow their loan portfolios. The focus must be on durable growth supported by disciplined credit practices, sound governance and strengthened risk management systems.

He noted that the current stability in the financial sector should now translate into purposeful financial intermediation. In practical terms, this means channeling credit into productive sectors such as agriculture, manufacturing and small and medium enterprises. These sectors are essential for job creation and long term economic transformation.

At the same time, banks must ensure that this renewed lending does not reintroduce the asset quality pressures that previously weakened the system.

“Stability must now translate into purposeful intimidation, supporting agriculture, manufacturing, SMEs and value adding sectors. Without reintroducing asset quality pressures, business model analysis will now form an embedded part of supervisory assessment, supporting the early identification of emerging risks and enabling timely policy and supervisory interventions.”
Dr. Johnson Asiama

While the Governor’s broader intention was clearly focused on purposeful intermediation, the central message was unmistakable. Growth must be strategic and carefully managed.

Business Model Analysis Takes Centre Stage

One of the most significant aspects of Dr. Asiama’s address was his announcement that business model analysis will now form an embedded part of the central bank’s supervisory framework.

This means regulators will not only review loan performance but will also assess the sustainability of banks’ overall strategies. By doing so, the Bank of Ghana aims to detect emerging credit risks early and intervene before they escalate into systemic challenges.

The approach reflects a shift from reactive supervision to proactive oversight. Rather than waiting for impairments to rise sharply, the regulator intends to identify vulnerabilities at an early stage.

Dr. Asiama reaffirmed that the central bank will remain firm but fair in its supervisory engagement as the sector transitions from stability to structural strengthening.

A Clear Warning to the Industry

For bank executives, the Governor’s remarks serve as both encouragement and caution. Encouragement because the sector has made tangible progress in reducing non-performing loans. Caution because the recovery remains incomplete and risks persist.

Aggressive lending cycles have historically created short term growth but long term instability. The resulting rise in bad loans not only weakens banks but also restricts their ability to support economic development when it is most needed.

Dr. Asiama’s call for disciplined underwriting and rigorous sectoral risk assessment is therefore more than a regulatory directive. It is a reminder that the health of the financial system depends on prudent decision making at every level.

As credit activity gradually resumes, the choices made by banks today will determine whether the sector moves toward lasting resilience or repeats past mistakes.