Foundation for a Resilient Banking Industry Established – Dr. Addison

The Governor of the Bank of Ghana (BoG), Dr. Ernest Addison, has stated that a strong foundation for a resilient banking industry has been established, positioning it well for future challenges.

In his remarks at the 28th Annual National Banking and Ethics Conference organized by the Chartered Institute of Bankers (CIB) Ghana, Dr. Addison emphasized that effective measures are in place to protect the financial sector, particularly banks, from both historical and emerging risks, even as the global and local financial landscapes continue to change.

Highlighting the theme “Resilience in the Financial Services Sector and Ecosystem: Navigating Horizon Risk,” he noted that ongoing vigilance from all stakeholders is essential to sustain progress. He pointed to rising risks such as technological disruptions, climate vulnerabilities, and economic shifts as critical issues that necessitate strategic foresight and proactive regulation.

According to official figures, the banking sector has shown signs of steady recovery, with assets increasing by 38.7 percent by the end of August 2024, compared to 19.6 percent during the same period last year. Profits for the first eight months of 2024 also exceeded those from the previous year.

The industry’s Capital Adequacy Ratio (CAR) improved to 10.3 percent in August 2024, up from 7.5 percent the previous year. Including relief measures, CAR reached 13.8 percent, slightly below the 14.2 percent recorded in August 2023. Additionally, liquidity and efficiency ratios have also shown positive trends.

Dr. Addison highlighted several BoG initiatives aimed at bolstering sector resilience, including reforms to enhance risk management, corporate governance, and capital adequacy. He emphasized the Bank’s commitment to climate and sustainability, promoting sustainable banking practices among regulated institutions.

In response to technological threats such as artificial intelligence and blockchain, the BoG has launched the Financial Industry Command Security Operations Centre to improve cybersecurity resilience.

Addressing Challenges

Benjamin Amenumey, President of CIB Ghana, raised concerns about issues such as credit risk, financial fraud, and macroeconomic pressures, which he identified as significant challenges facing the sector. He noted the lingering impacts of the recent Domestic Debt Exchange Programme (DDEP) and highlighted the rising level of non-performing loans (NPLs) as a major worry, stating that persistent economic pressures have affected borrowers’ ability to repay loans.

Despite improvements in the sector, the NPL ratio rose to 24.3 percent in August 2024, compared to 20 percent the previous year, indicating that credit risk remains a pressing concern.

Financial fraud has also increased, with a 5 percent rise in reported cases, including a troubling 46 percent rise in staff involvement in fraudulent activities, according to the latest BoG fraud report. Amenumey called for stronger internal controls, ethical training, and enhanced corporate governance as essential measures to address these issues.

Industry Collaboration

Kofi Adomakoh, President of the Ghana Association of Banks (GAB) and CEO of GCB Bank, emphasized the need for a unified approach to tackle the challenges posed by cybersecurity threats, disruptions from fintech, and the rapid advancement of technology. He commended CIB Ghana for its initiatives aimed at equipping bankers with necessary skills but urged for additional certifications in areas like digital innovation and data analytics.

Adomakoh also expressed concerns about the talent drain from Ghana’s banking sector, urging stakeholders to invest in the ongoing skill development of banking professionals to keep pace with the changing landscape.

Despite these challenges, Adomakoh expressed optimism, asserting that the Ghanaian banking sector is resilient and well-equipped to meet the evolving needs of clients while contributing to the nation’s economic development.

Emphasizing Ethics

Both the BoG and GAB highlighted the critical role of ethical practices in fostering resilience. Dr. Addison underscored that ethical certification should be a standard requirement across the industry, urging banks to enroll their staff in the Ethics Certification Programme to uphold professionalism.

Adomakoh echoed this sentiment, stating that the sponsorship of the conference reflects a commitment to education, thought leadership, and capacity building. He called for a culture of ethics and professionalism to enhance public trust in the financial system.

There was a strong call for greater collaboration among regulators, financial institutions, and stakeholders to strengthen the financial system against future challenges. Amenumey encouraged participants to embrace risks as integral to building resilience, emphasizing that resilience is achieved not by avoiding risks, but by adapting and seizing opportunities.