Bank of Ghana must intensify supervision to reduce bad loans – Economist

Business News of Thursday, 18 January 2018

Source: citibusinessnews.com

2018-01-18

Ernest Addison22Governor of the Bank of Ghana, Dr. Ernest Addison

The Bank of Ghana has been advised to intensify its supervisory roles to prevent over lending by banks that may meet the new capital requirement.

Some financial observers have raised concerns that banks that may meet the minimum capital requirement of 400 million cedis may be tempted to lend above the required threshold due to the new capital base.

The observation follows concerns raised by the International Monetary Fund(IMF), urging the central bank to implement the provisions in the Basel Two agreement to avert such a situation.

Speaking to Citi Business News on the issue, Economist, Dr. Ebo Tuckson warned that the banking sector may see another high Non Performing Loans(NPL) if measures are not instituted to check over lending after banks meet the capital requirement.

He urged the Bank of Ghana to be strict and ensure that bank’s NPL does not go beyond 10 percent since it could have a negative impact on the financial system.

“I think the central bank’s supervision should be enhanced. I think the point the IMF has been making is that the central bank should be tough on controlling NPL. It looks as if there are loopholes in the banking system. Who are those collecting the loans and defaulting?” he queried.

Dr. Tuckson maintained that the central bank must compel banks to use the Credit Reference Bureau system to avoid loans that may go bad.

“If we have a very good Credit Reference Bureau in this country, [the law have been passed and I’m expecting the case], then it should be possible that high-risk persons are identified before loans are advanced to them,” he said.

“But if the banks are not using these institutions to ensure that these loans don’t go bad. I think the Bank of Ghana has to be tough with the banks and monitor them closely,” he added.

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