22% of banks in Ghana fail to meet 13% Capital Adequacy Ratio (CAR) threshold

Ghana’s banking sector faces a significant challenge, with about 22% of banks failing to meet the 13.0% Capital Adequacy Ratio (CAR) threshold, IC Insights reports.

It is understood that the majority of the affected banks are domestic institutions, owned and controlled by Ghanaians.

The Capital Adequacy Ratio (CAR) is a crucial measure of the industry’s financial health, indicating the ability of banks to absorb losses and maintain stability.

IC Insights reports that, the affected banks would need to consistently follow their recapitalization plans, enforcement of strict credit risk standards, and sustained profitability to restore their capital buffers to pre-Domestic Debt Exchange Programme (DDEP) levels.

However, IC Insights highlighted that the banking sector is making good progress on capital restoration as it heads into the final year of regulatory relief.

“The disaggregated data on the banking sector’s solvency position showed steady improvement in the industry’s capital adequacy ratio as CAR (with regulatory relief) stood at 14.3% in October 2024. Notably, the CAR level (without regulatory relief) stood at 11.1%”, the report noted.

This figure shows an uptick from 7.3% in the prior year, and with 2025 marking the last year of regulatory easing, there are hopes for sustained progress and stabilization.

The November 2024 Monetary Policy Report indicates that the solvency indicators improved, with the capital adequacy ratio (with reliefs) increasing to 11.1% (14.2 %) from 7.3% (13.4%) in October 2023.

Although there were positive trends in other areas, credit risks saw a notable increase, with the Non-Performing Loan (NPL) ratio climbing to 22.7% from 18.3% over the review period.

Story: Novire Kuuyizie Francis