The Governor of the Bank of Ghana, Dr. Johnson Asiama has cautioned banks against overreliance on interest income, warning that a normalising interest rate environment could test the sector’s earnings resilience.
Addressing heads of banks after the latest Monetary Policy Committee (MPC) meeting, Governor Dr. Johnson Asiama disclosed that approximately 68 percent of industry profitability is driven by net interest income, the spread between what banks earn on loans and government securities and what they pay on deposits.
While he stressed that interest income remains a legitimate and core component of banking operations, he warned that excessive dependence heightens exposure to interest rate cycles and sovereign risk dynamics.
A recent thematic review by the central bank found that loans account for less than one-fifth of total industry assets, underscoring limited financial intermediation. At the same time, asset concentration in sovereign and central bank instruments remains elevated, further linking bank profitability to monetary policy shifts.
“There is nothing inherently problematic about net interest income,” Dr. Asiama noted. “However, a high dependence on it increases sensitivity to interest rate cycles and sovereign exposure dynamics.”
The caution comes at a time when Ghana’s macroeconomic environment is stabilising. The central bank last month reduced its benchmark policy rate by 250 basis points to 15.5 percent, citing faster-than-expected disinflation and anchored inflation expectations. Headline inflation slowed sharply from 23.8 percent in December 2024 to 3.8 percent in January 2026 — the lowest level since the adoption of inflation targeting — while real GDP expanded by 6.1 percent in the first three quarters of 2025, driven largely by services and agriculture.
The easing cycle has already translated into declining money market yields. Treasury bill rates have compressed for three consecutive weeks, with the 91-day bill falling to 8.61 percent, the 182-day to 10.68 percent, and the 364-day to 11.06 percent — significantly lower than levels recorded at the start of the year. While this reduces government borrowing costs, it also signals narrowing margins for banks heavily invested in these instruments.
As rates moderate and yields decline, banks’ traditional income streams from high-yield government securities may come under pressure. The Governor therefore urged institutions to diversify revenue sources by strengthening transactional banking, trade finance, payments services, treasury operations and other fee-based income lines that are less balance-sheet intensive and less directly tied to rate movements.
On asset quality, he acknowledged improvements in non-performing loans but cautioned that they remain above benchmark levels. With credit growth expected to pick up amid lower rates, he stressed that strong underwriting discipline and sectoral risk assessment will be essential to prevent a renewed build-up of bad loans.
The central bank also plans to embed business model analysis more firmly within its supervisory framework to enable early detection of emerging risks and timely regulatory intervention.
The Governor’s message signals a strategic pivot for the banking industry — from profitability driven largely by elevated interest rates and sovereign instruments to a more diversified, resilient and intermediation-focused model capable of withstanding shifts in monetary conditions.
