By Kofi AHOVI
The banking sector has shown a positive growth, compared to the same period last year, according to the latest Monetary Policy Committee report of the Bank of Ghana (BoG)
Total assets of the banking industry grew by 25.2% to GH¢17.9 billion or 33.5% GDP at the end of February 2011 on top of the 29.6% growth achieved during the corresponding period of 2010.
“Overall developments in the banking system through February 2011 show strong asset growth and improvement in financial soundness indicators,” the report stated.
The Capital Adequacy Ratio (CAR) of the banking industry, which measures the banking system’s capacity to withstand unexpected losses, stood at 18.5% as at February 2011, well above the statutory threshold of 10%. Currently, all the banks have satisfied the minimum capital requirement.
In a special exercise, according to the report, two banks were approved to transfer some of their impaired assets to debt recovery companies to accelerate the pace of debt recovery.
Excluding assets transferred for special recovery, the Non Performing Loan (NPL) ratio of the banks, which was 17.2% in January 2011, had improved to 16.1% in March 2011.
The settlement of a substantial part of the arrears owed by government to contractors and service providers in March, this year, is expected to contribute to a further reduction in the NPL ratio.
The latest credit conditions survey of banks, conducted by the BoG, points to the easing of the credit stance for small and medium sized companies and large enterprises. Households’ consumer credit also benefitted from the ease in the credit stance.
However, collateral requirements continued to weigh down on credit for mortgages. The banks eased credit through a reduction in margins on average loans and increases in the maximum size of loans.
The improved credit conditions for all categories of borrowers partly reflected improved prospects of the general economy.
Nonetheless, the extension of credit by the commercial banks to the private sector, which was observed to have recovered through the fourth quarter of 2010, slowed down significantly in the first quarter of 2011.
Credit to the private sector declined by 4.2% in real terms in the first quarter of 2011, compared with a growth of 9.75% during the fourth quarter of 2010.
The banking sector has shown a positive growth, compared to the same period last year, according to the latest Monetary Policy Committee report of the Bank of Ghana (BoG)
Total assets of the banking industry grew by 25.2% to GH¢17.9 billion or 33.5% GDP at the end of February 2011 on top of the 29.6% growth achieved during the corresponding period of 2010.
“Overall developments in the banking system through February 2011 show strong asset growth and improvement in financial soundness indicators,” the report stated.
The Capital Adequacy Ratio (CAR) of the banking industry, which measures the banking system’s capacity to withstand unexpected losses, stood at 18.5% as at February 2011, well above the statutory threshold of 10%. Currently, all the banks have satisfied the minimum capital requirement.
In a special exercise, according to the report, two banks were approved to transfer some of their impaired assets to debt recovery companies to accelerate the pace of debt recovery.
Excluding assets transferred for special recovery, the Non Performing Loan (NPL) ratio of the banks, which was 17.2% in January 2011, had improved to 16.1% in March 2011.
The settlement of a substantial part of the arrears owed by government to contractors and service providers in March, this year, is expected to contribute to a further reduction in the NPL ratio.
The latest credit conditions survey of banks, conducted by the BoG, points to the easing of the credit stance for small and medium sized companies and large enterprises. Households’ consumer credit also benefitted from the ease in the credit stance.
However, collateral requirements continued to weigh down on credit for mortgages. The banks eased credit through a reduction in margins on average loans and increases in the maximum size of loans.
The improved credit conditions for all categories of borrowers partly reflected improved prospects of the general economy.
Nonetheless, the extension of credit by the commercial banks to the private sector, which was observed to have recovered through the fourth quarter of 2010, slowed down significantly in the first quarter of 2011.
Credit to the private sector declined by 4.2% in real terms in the first quarter of 2011, compared with a growth of 9.75% during the fourth quarter of 2010.
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