The Bank of Ghana’s (BoG) Notice No. BG/GOV/SEC/2025/23 mandates that all regulated commercial financial institutions maintain their Non-Performing Loan (NPL) ratios below a strict 10% prudential ceiling by December 31, 2026 and 5% for microfinance institutions.
However, a detailed analysis of the directive and the financial sector’s NPL situation by financial and banking consultant Dr. Richmond Atuahene reveals an alarming paradox. According to financial and banking consultant, although the Bank of Ghana may mean well for the sector, aggressively enforcing this regulatory cap threatens to collapse Ghana’s indigenous and state-owned commercial banks.
For him, rather than correcting bad credit underwriting alone, strict enforcement penalizes domestic institutions for a systemic bad-debt crisis generated primarily by sovereign illiquidity.
The Sovereign Indebtedness: The GH¢45.7 Billion Legacy Debt Driver
Central to Dr. Atuahene’s findings is data as of June 30, 2026, tracking how government indebtedness directly fuels the financial sector’s NPLs. According to him, verified legacy liabilities across all sectors originally totaled GH¢68.8 billion.
To date, the state has disbursed GH¢23.1 billion, leaving a massive outstanding legacy debt balance of GH¢45.7 billion trapped as non-performing loans on commercial bank balance sheets. This sovereign arrears crisis is heavily concentrated in key economic sectors.
Independent Power Producers (IPPs) and Fuel Suppliers: Net payables stand at US$1.7 billion, after the government paid US$400 million out of an initial US$2.1 billion legacy obligation.
Road Contractors: Outstanding debt under the Ghana Road Maintenance Trust Fund exceeds GH¢10 billion, even after recent disbursements clearing GH¢3 billion in certified claims.
Because contractors and service providers rely heavily on public procurement, unpaid state bills render viable firms unable to service commercial bank loans, converting healthy private credit into toxic NPLs.
With this situation, he therefore goes ahead to enumerate how the strict enforcement of the 10% mandatory cap will adversely affect indigenous banks.
Disproportionate Exposure and the Indigenous Bank Trap
Dr. Atuahene highlights a severe ownership disparity in asset quality across Ghana’s banking system. While foreign-owned subsidiaries enforce conservative parent-level underwriting and risk controls, indigenous and state-owned banks carry strategic national mandates to fund local infrastructure, agriculture, and public contractors.
Consequently, domestic institutions bear what he describes as catastrophic NPL concentrations. He notes Agricultural Development Bank (ADB) at 70.5%, National Investment Bank (NIB) at 69.7% (moderating slightly to 66% in Q1 2026), Prudential Bank at 57.0%, Universal Merchant Bank (UMB) at 52.2%, and Consolidated Bank Ghana (CBG) at 33.4%, a sharp deterioration from its 12.5% NPL ratio recorded at end-2024.
The Aggressive Sanctions, Forced Write-offs, and Pro-Cyclical Distress
Dr. Atuahene warns that the BoG’s aggressive enforcement rules create what he refers to as severe pro-cyclical distress. Under Notice No. BG/GOV/SEC/2025/23, non-compliant banks face prohibitions on dividend distributions, executive bonus payouts, and loan portfolio growth starting January 1, 2027.
Furthermore, the central bank mandates the immediate write-off of loss, substandard, or doubtful loans with individual thresholds of GH¢50,000+.
He says, forcing local banks to absorb these abrupt accounting hits strips away income-earning assets and rapidly depletes capital reserves rebuilt after earlier banking sector clean-ups. To avoid regulatory sanctions, high-NPL local banks adopt extreme risk-aversion, freezing credit to small and medium-sized enterprises (SMEs), tightening collateral demands, and passing operational costs onto borrowers through higher interest rates.
Forcing aggressive deleveraging during a slow recovery pushes struggling businesses into liquidation rather than rehabilitation.
A Policy Mismatch Through 2028
Dr. Atuahene stresses that regulatory directives alone are “necessary but not sufficient”. The state’s overarching Strategy on the Dismantling of Domestic Arrears extends multi-year through 2028, two years after the BoG’s December 2026 prudential deadline.
Enforcing rigid NPL caps before the state liquidates its GH¢45.7 billion legacy liabilities or establishes specialized Asset Management Companies (AMCs) leaves domestic banks defenseless, risking systemic insolvency for Ghana’s indigenous lenders.
