Bank of Ghana urges structural reforms as MPC cuts policy rate to 15.5%

Governor of the Bank of Ghana, Dr. Johnson Pandit Asiama, has called on banks to shift their focus from resilience to structural strengthening, following the restoration of macroeconomic stability and improved financial conditions.

Speaking at the Post-Monetary Policy Committee (MPC) engagement with Chief Executive Officers and Heads of Banks at Bank Square on Wednesday, Dr. Asiama said the banking sector must now reposition itself for durability and long-term transformation.

MPC Cuts Policy Rate

Dr. Asiama disclosed that at its 128th meeting in January 2026, the MPC reduced the Monetary Policy Rate by 250 basis points to 15.50 percent. The decision, taken by majority vote, reflected declining inflation and well-anchored expectations.

Inflation dropped sharply from 23.8 percent in December 2024 to 5.4 percent by December 2025, and further to 3.8 percent in January 2026 — the lowest level recorded since Ghana adopted inflation targeting.

“The Committee judged that monetary conditions remained sufficiently tight relative to prevailing inflation dynamics,” he said.

Stronger Macroeconomic Environment

The Governor noted that both global and domestic economic conditions had improved. Globally, growth in 2025 proved more resilient than expected, supported by easing inflation and strong investment activity. The outlook for 2026 points to steady, though uneven, expansion.

Domestically, Ghana’s economy expanded by 6.1 percent in the first three quarters of 2025, driven largely by services and agriculture. Business and consumer confidence have strengthened, supported by lower inflation, exchange rate stability, and expectations of reduced borrowing costs.

Fiscal consolidation has also contributed to stability, with a lower budget deficit, a strong primary surplus, and a marked decline in public debt. On the external front, strong export earnings and private transfers have supported a balance of payments surplus and boosted international reserves.

Banking Sector Must Strengthen Structure

With stability restored, Dr. Asiama said attention must now turn to strengthening the structural foundations of the banking sector.

A recent thematic review of banks’ business models confirmed that the sector remains viable and profitable. However, it highlighted key structural concerns.

Financial intermediation remains modest, with loans accounting for less than one-fifth of total industry assets. Asset concentration in sovereign and central bank instruments remains high, while approximately 68 percent of industry profitability is driven by net interest income.

While not inherently problematic, the Governor warned that heavy reliance on net interest income increases sensitivity to interest rate cycles and sovereign exposure risks.

“As margins compress in a normalising rate environment, earnings resilience will increasingly depend on diversification,” he stated, urging banks to expand transactional banking, trade services, payments, treasury operations, and other fee-based income streams.

Although non-performing loans have declined, they remain above benchmark levels. Dr. Asiama stressed that as credit growth resumes, underwriting discipline and sectoral risk assessment will be critical to avoid renewed asset quality pressures.

Cybersecurity and Regulatory Developments

On cybersecurity, the Governor revealed that 87 percent of banks evaluated maintain fully continuous 24/7 monitoring through Security Operations Centres (SOCs), demonstrating strong recognition of cyber risk.

However, he cautioned that a few institutions still operate with limited monitoring coverage or incomplete log reporting, warning that gaps in visibility could heighten systemic vulnerability.

Dr. Asiama also highlighted key legislative reforms. Parliament has passed the Bank of Ghana (Amendment) Act, 2025, reinforcing the Bank’s operational independence while strengthening transparency and accountability.

Additionally, the Virtual Asset Service Providers Act has been enacted, establishing a formal regulatory framework for digital asset activities in Ghana. The Bank is currently developing supervisory processes and regulatory guidelines to operationalise the law.

“Virtual assets will interact with the banking system through settlement accounts, custody arrangements, compliance infrastructure, and payment channels,” he said, urging banks to build capacity in digital asset risk assessment and technology governance.

Push for More Bank Listings

The Bank of Ghana has also inaugurated Steering and Technical Committees to encourage more banks to list on the Ghana Stock Exchange. The initiative involves collaboration with the Securities and Exchange Commission, the Ministry of Finance, the Ghana Stock Exchange, and other financial sector stakeholders.

Dr. Asiama explained that listing is not only about capital raising but also about broadening ownership, strengthening governance, deepening transparency, and anchoring banks more firmly in domestic long-term savings.

A Call for Durability

“Stability has been restored. The task now is durability,” the Governor concluded.

He emphasized that durability requires stronger business models, deeper financial intermediation, disciplined innovation, and sound governance.

“The Bank of Ghana will continue to engage as a firm, fair, and forward-looking partner, supportive where necessary, but clear in its expectations,” he assured.

Dr. Asiama said the next phase of Ghana’s financial sector development must be built on shared responsibility to ensure a banking system that is not only stable but structurally positioned to support the country’s long-term transformation.