BoG governor urges banks to show prudence in lending rate adjustments after policy hike

Governor Asiama also calls for stronger risk management and transparency with clients amid evolving economic conditions

The Governor of the Bank of Ghana (BoG), Dr. Johnson Pandit Asiama, has called on banks to exercise caution when adjusting their lending rates following the central bank’s latest monetary policy decisions. He further urged financial institutions to maintain open and transparent communication with clients, especially during this period of economic recalibration.

Speaking at the first post-Monetary Policy Committee (MPC) engagement with CEOs of commercial banks in Accra, Dr. Asiama emphasized that while interest rate changes are expected following the Bank’s policy rate hike, lenders must remain mindful of their role in supporting economic growth.

“We expect lending institutions to adopt a responsible and forward-looking approach when reviewing their pricing models,” Dr. Asiama stated. “Transparency with clients must remain a top priority.”

The MPC recently increased the policy rate by 100 basis points, moving it from 27% to 28%, as part of the Bank’s continued efforts to tackle inflationary pressures and support the disinflation process. The Governor noted that although inflation has begun to ease, the pace remains slower than anticipated—necessitating continued monetary tightening.

Dr. Asiama reported a notable improvement in financial sector stability following the Domestic Debt Exchange Programme (DDEP), with banks showing stronger profitability and undergoing ongoing recapitalization efforts.

As of February 2025:

• Total banking assets grew by 34.05% year-on-year, largely funded by a 27.89% increase in customer deposits.
• The industry recorded a Capital Adequacy Ratio (CAR) of 14.35%, comfortably above the 10% regulatory minimum.

However, the Governor cautioned that solvency concerns persist for some domestically controlled and state-owned banks, especially those without clear recapitalization plans.

The central bank has identified rising credit risks as a key issue and is urging banks to enhance their risk management practices, including:

• Stricter underwriting standards
• Early warning systems
• Improved loan provisioning

These measures, according to the BoG, are essential to safeguarding asset quality and maintaining resilience in the face of economic headwinds.

Looking beyond monetary and regulatory issues, Dr. Asiama encouraged banks to deepen strategic partnerships and invest in digital transformation and product innovation. He noted that these actions are crucial not only for competitiveness but also for supporting financial inclusion.

In line with this agenda, the BoG plans to engage more actively with non-bank financial service providers, aiming to create a more inclusive and resilient financial ecosystem that prioritizes both innovation and consumer protection.

Governor Asiama’s remarks underscore the Bank of Ghana’s balanced approach to monetary policy, tightening rates to manage inflation while promoting stability, responsible lending, and inclusive financial growth. As the policy rate adjustment begins to ripple through the economy, the central bank expects the financial sector to respond with prudence, transparency, and a strong focus on long-term resilience.

By; Patrick Teye

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