The Bank of Ghana has reiterated that the banking sector’s performance is showing some recovery from the implementation of the Domestic Debt Exchange Programme (DDEP) and the macroeconomic headwinds that confronted the sector in 2022.
According to the Central Bank, the sector remains solvent despite declines in some of the financial soundness indicators.
“The industry outlook remains stable, despite the lingering impact of the DDEP and implementation of the regulatory reliefs, as well as the operationalization of the Financial Stability Fund”, it stated in the May 2023 Banking Sector Report.
It continued that key financial soundness indicators moderated in 2022, notwithstanding the regulatory reliefs provided by the Central Bank. However, the industry is improving.
The industry’s average Capital Adequacy Ratio (CAR) adjusted for the regulatory reliefs was 16.2% in December 2022, compared with the CAR of 19.6% in December 2021.
The adjusted CAR it said reflected valuation losses on Government of Ghana bonds, elevated credit risk, and revaluation losses on foreign-currency-denominated loans.
Asset quality also weakened, with the industry’s Non-Performing Loans (NPL) ratio at 18.4% in December 2022, from 15.9% in December 2021, reflecting higher loan impairments relative to the growth in the stock of loans.
The overall performance of the banking sector in 2022 was broadly indicative of the peculiar challenges that the industry was confronted with during the year, particularly the challenging operating macroeconomic environment and, most significantly, the Domestic Debt Exchange Programme.