Credit risk

Banks face heightened credit risk in rising NPLs – BoG

As the Covid-19 pandemic rages on, the Bank of Ghana says Ghanaian banks are facing heightened credit risk as evidenced by rising non-performing loan ratios, which is of great concern to banks, creditors. supervisors and macroeconomic policy makers.

“Furthermore, the extent of banks’ credit risk cannot be assessed with a high degree of certainty given the uncertain economic outlook amid the pandemic and the fact that many relief provided by banks to borrowers at the start of the pandemic remain in effect. Another major concern is the impact of the pandemic on the ability of supervisors to conduct onsite reviews of banks, given the limitations of offsite reviews of loan books,” said Elsie Addo-Awadzi, Second Deputy Governor. of the Bank of Ghana, during the conference. Regional Bank of Ghana/Bank of England event on “Microprudential Supervision of Credit Risk”.

This, she said, the regional training event therefore provides an excellent opportunity for banking supervisors in Africa to discuss common challenges and identify common solutions that work for the region, while learning from some of the experiences of the Bank of England and other advanced supervisors. .

On the Ghanaian side, Ms. Addo-Awadzi said the Bank of Ghana’s banking sector reforms over the past few years have helped insulate banks somewhat from the impact of the pandemic.

“As we look ahead in an uncertain economic future, I hope that the peer learning from this training event will help supervisors in Africa to improve the quality of microprudential supervision of bank credit risk and will help to better promote the stability and resilience of the African banking system,” she explained.

She added that the theme of this three-day event – Microprudential Credit Risk Monitoring – has always been essential to promote the safety, soundness and resilience of the banking sector, a number of factors explain the high credit risk to which facing banks in Africa. These include poor credit underwriting standards of some banks, weak credit market infrastructure such as credit information systems, loan enforcement difficulties in the face of defaults and macroeconomic challenges that impact the real sector, among others.

The regional events will help build the supervisory capacity of central banks in the region through peer-to-peer learning, as well as find cutting-edge solutions to supervisory challenges.