Home World Financial sector robust before debt restructuring, but sector cleanup yet to be...

Financial sector robust before debt restructuring, but sector cleanup yet to be fully implemented – IMF


Ghana’s financial sector was relatively robust before the debt restructuring, but the sector’s cleanup were yet to be fully implemented, the International Monetary Fund (IMF) Staff Report on Ghana has revealed.

According to the Fund, the aggregate Non-Performing Loans (NPLs) had declined from 17% in 2019 to about 15% at end-2022, and the sector had been well-capitalised except for a few institutions.

However, several steps under the financial sector cleanup were yet to be implemented.

Banks to submit plans to rebuild capital buffers

Meanwhile, banks are expected to submit their credible time-bound plans to rebuild capital buffers on a phased basis, as a result of the impact of the Domestic Debt Exchange Programme.

This is in line with timelines set out in the financial sector strategy.

According to the IMF Staff Report, the plans will be reviewed by the Bank of Ghana and finalised by the banks for BoG approval by end-September 2023 (structural benchmark).

As part of this process, it said, regulatory forbearance, including capital requirements, will be lifted as soon as possible.

“The BoG will monitor the expected capital shortfalls stemming from the ongoing recognition of debt restructuring losses in CAR [Capital Adequacy Ratio] calculations and ensure the plans on rebuilding capital buffers are implemented based on periodic milestones”.

“Further incentives to banks to expedite the process will include the prohibition of distributing dividends, restrictions in risk exposures, and enhanced monitoring for those that do not meet minimum CAR, and support for early recapitalization from the GFSF [Ghana Financial Stability Fund]. Any government support for recapitalization will be designed to incentivize private capital injection and will be conditional on reforms to improve long-term profitability”, it explained.

DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.

Source link


Please enter your comment!
Please enter your name here