Banks recapitalisation: BoG to closely monitor capital restoration efforts
Dr Ernest Addison — Governor, BoG

Banks recapitalisation: BoG to closely monitor capital restoration efforts

Despite the soundness, positive liquidity state and profitability of banks in Ghana, the Bank of Ghana (BoG) says it will continue to closely monitor the capital restoration efforts of players in the industry.


That, the central bank said, will be done in line with approved plans, including through support from the Ghana Financial Stability Fund following the impact of the Domestic Debt Exchange Programme (DDEP) implemented by the government last year to reduce the country’s debts. 

“We expect early recapitalisation to promote banking sector resilience and effective financial intermediation to help speed up macroeconomic economic recovery going forward,” Governor Ernest Addison said in his remarks during a joint presser between the Government of Ghana and the International Monetary Fund (IMF).

The fund’s board had approved the second tranche of $600 million from the $3 billion bailout support the fund had earmarked for Ghana.

Recapitalisation plans

In the last quarter of 2023, the Bank of Ghana gave a clean bill of lading to the banks, saying it had reviewed and was satisfied with the recapitalisation plans of all the 23 banks operating in the country.

The governor said all the plans submitted by the banks have been thoroughly reviewed by the Banking and Supervision Department of the central bank and sees all of them as credible plans.

Banks in the country have relatively been stable following the financial sector clean-up which saw them increase their stated capital to GH¢400 million.

Their fortunes were, however, eroded after the implementation of the DDEP, which saw the participation of all 23 commercial banks in the country hit hard at once. About 16 banks recorded significant losses the previous year. A development confirmed after an analysis by the BoG indicated that the banks recorded losses totalling GH¢8 billion in the year under review. 

The debt restructuring exercise forced the banks to set aside huge amounts of money as impairment losses, which led to a majority of the banks recording losses in 2022.

This led to severe liquidity and capital challenges for the banks, with some already rolling out plans to quickly recapitalise. 

As a sector which has already gone through some reforms which collapsed nine banks, this presented fresh challenges for the industry.

Under the IMF programme, the banks were expected to submit their credible time-bound plans to rebuild capital buffers on a phased basis, in line with timelines set out under the financial sector strategy.

The banks had up to the end of September to submit their recapitalisation plans to the BoG, a requirement they all complied with ahead of the September deadline.


Meanwhile, banks are expected to build up capital buffers in the coming months to account for further losses occasioned mainly by the implementation of the government’s DDEP.

The move is also a safeguard, as they provision for worsening loan quality, according to a Fitchsolutions report. 

The Ghanaian financial sector has been in severe distress, characterised by an insolvent banking system as a result of the DDEP, a banking expert, Dr Richmond Atuahene said in a study.  

Using the 16 per cent discount rate for the Net Present Value calculation for government bonds, the Domestic Debt Exchange Programme losses of 22 banks stood at ¢37.7 billion, with the private domestic banks and state-owned banks accounting for losses of ¢19.9 billion while foreign-owned banks accounted for ¢17.8 billion. 

The DDEP impairment losses have technically rendered some Ghanaian local-owned banks insolvent, and it would require additional capital support from shareholders or participate fully in the Ghana Financial Stability Fund. 

Capital adequacy ratio

The Fitchsolutions report said the capital adequacy ratio (CAR) of Ghana’s banking sector stood at 14.2 per cent in August last year for the third month while some of the largest banks in Ghana saw their CAR increase between the second quarter (Q223) and third quarter (Q323). 

The banking sector has seen a considerable deterioration in capital since April 2022, as a result of losses on investments, especially government securities, and increases in the risk-weighted assets of banks, from currency depreciation and credit growth. 

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