In recent years, Ghana’s financial sector has experienced a wave of regulatory and structural reforms aimed at fostering stability and investor confidence. Amid global economic uncertainties and domestic challenges, the country is adopting risk-based regulation (RBR) as the new standard for banking oversight. This shift marks a move away from traditional compliance-based supervision to a more proactive and responsive framework that emphasizes risk management, forward-looking assessments, and institutional resilience.
In a recent statement, Dr. Johnson Asiama, Governor of the Bank of Ghana, underscored this strategic shift, stating that the central bank is advancing toward risk-sensitive regulation and a system award model that not only enforces compliance but also seeks to shape a banking sector that is “agile, accountable, and prepared for the future.” His remarks came against the backdrop of Ghana’s financial sector reforms, which are building momentum following disruptions such as the banking sector clean-up and the Domestic Debt Exchange Programme (DDEP).
This reform agenda is further justified by the findings of the 2024 Fraud Report, which revealed a 5.0% increase in fraud cases and a 13.0% rise in the value at risk. Dr. Asiama emphasized that these developments heighten the urgency for banks to reinforce internal controls and oversight mechanisms, which are fundamental pillars of risk-based regulation.
Aligning Credit Delivery with Risk Management
One of the most visible impacts of this regulatory shift is on how banks deliver credit. As risk-based regulation takes root, banks are being encouraged to align their lending practices with prudential norms that promote both profitability and system-wide stability. Dr. Asiama acknowledged that while the policy rate hikes aimed at controlling inflation may raise borrowing costs and constrain business activity, there remains a pressing need to strike a balance between prudence and support for economic growth.
This approach appears to be shaping credit behavior already. In April 2025, the Ghana Reference Rate (GRR) stood at 23.99 percent, signaling a relatively softer stance on lending compared to earlier tight monetary conditions. Furthermore, data from February 2025 shows that private sector credit experienced an annual growth of 26.9%, a major rebound from the modest 5.1% growth recorded in February 2024. When adjusted for inflation, real credit growth stood at 3.1 percent, compared to a contraction of 14.7 percent during the same period last year.
This rebound is indicative of renewed lending confidence amidst broader sectoral recovery. However, banks are expected to adopt more sophisticated credit risk assessment tools. This includes robust stress testing, loan portfolio reviews, and the integration of macroeconomic indicators into credit decision-making frameworks. Risk-based regulation mandates that banks not only evaluate a borrower’s creditworthiness but also consider broader systemic and sector-specific risks that could affect loan performance.
Enhancing Supervisory Effectiveness and Financial Stability
The implementation of RBR enhances the effectiveness of supervisory oversight by enabling regulators to allocate their resources where the risk is greatest. Unlike the traditional “one-size-fits-all” approach, risk-based regulation allows supervisory bodies to differentiate oversight based on the institution’s size, complexity, and systemic importance.
To support this evolution, the Bank of Ghana is enhancing its supervisory capabilities. Notably, the central bank is developing a Resolvability Assessment Framework aimed at boosting crisis preparedness in the event of financial distress. Additionally, supervisors are being trained in artificial intelligence (AI), climate risk, and geopolitical instability, equipping them with the tools to identify and respond to a broader array of emerging risks.
The importance of these reforms cannot be overstated. As of end-February 2025, the Ghanaian banking sector recorded impressive growth: total assets increased by 34.05 percent year-on-year, and deposits rose by 27.89 percent. Moreover, the Capital Adequacy Ratio (CAR) stood at 14.35 percent, comfortably above the 10 percent regulatory minimum.
Yet, vulnerabilities remain. Solvency challenges persist in some domestically controlled and state-owned banks, where recapitalization efforts remain incomplete. In such instances, risk-based regulation offers a structured way to escalate supervisory interventions, mitigate contagion, and uphold public confidence.
Opportunities and Challenges in Implementation
Despite its benefits, the transition to RBR presents a number of implementation challenges. For banks, the shift requires a cultural reorientation—from treating compliance as a checklist to embedding risk management into every aspect of operations. This transformation demands investment in technology, data infrastructure, and talent capable of supporting real-time risk monitoring and decision-making.
Data governance is particularly critical. Inaccurate or incomplete data can lead to misjudged risks, weakening both internal controls and regulatory oversight. As part of its reform agenda, the Bank of Ghana is encouraging banks to improve the quality, timeliness, and transparency of their reporting.
The sector’s uneven readiness poses another hurdle. Larger, well-capitalized banks are likely to adapt more easily, while smaller and rural institutions may lack the resources to meet the requirements of RBR. This disparity must be managed carefully to avoid creating systemic imbalances or regulatory bottlenecks.
Collaboration is essential. Regulators, banks, and industry associations must engage in structured dialogue, capacity building, and technical support to ensure that no institution is left behind. In doing so, the reform process can become an inclusive journey that elevates the resilience of the entire financial sector.
Enhancing Supervisory Capabilities for a Future-Ready Banking Sector
As the sector moves toward a risk-sensitive regulatory framework, the role of the regulator is shifting from reactive enforcement to proactive, forward-looking oversight. This transition is crucial to building a banking system that is resilient, adaptive, and better prepared to confront both local and international challenges.
A key component of the Bank of Ghana’s strategy is the development of a Resolvability Assessment Framework (RAF)—a mechanism designed to enhance crisis preparedness and ensure that banks, especially those deemed systemically important, can be wound down or resolved without threatening the broader financial system.
This framework complements the broader shift to a system award model of supervision, which rewards institutions for maintaining strong internal controls and long-term resilience. It reflects a more nuanced understanding of risk—not only from a compliance standpoint but also in terms of operational sustainability, market conduct, and governance culture.
Moreover, the evolution of banking supervision now calls for a broader skill set among supervisors. Traditional auditing and inspection techniques are no longer sufficient in the face of artificial intelligence, cyber threats, and digital currencies. As such, supervisors are being retrained to understand technological risks, cyber resilience frameworks, environmental disclosures, and stress testing models tailored to climate-related risks.
A critical area of focus is the resilience of digital infrastructure. As banks digitize core operations, ensuring cybersecurity and operational continuity become just as important as safeguarding liquidity and capital. Ghana’s regulators are increasingly demanding that banks institute and regularly test business continuity plans, establish redundant systems, and adopt multi-layered defenses against cyberattacks. These requirements are embedded in the evolving supervisory guidelines.
Finally, stakeholder engagement plays a vital role. Enhancing supervisory capacity is not solely about the regulator—it involves a deeper relationship with financial institutions. Through regular dialogue, stress-testing simulations, and scenario planning exercises, the BoG and the banking industry can co-create a system that balances resilience with innovation.
Catalyze More Responsible and Impactful Credit Delivery
Risk-based regulation has the potential to catalyze more responsible and impactful credit delivery, especially to strategic sectors like agriculture, manufacturing, and renewable energy. By tailoring credit products based on risk, banks can reduce default rates while supporting Ghana’s development agenda.
The improved stability and transparency introduced by RBR are also expected to boost investor confidence. As the sector aligns with international best practices, Ghana is likely to attract more foreign direct investment (FDI) and development finance, especially from stakeholders who prioritize good governance and robust risk management.
From a macroeconomic standpoint, risk-based regulation helps smoothen credit cycles, supports effective monetary policy transmission, and minimizes the chances of financial crises. The discipline it enforces ensures that banks remain solvent and liquid, even during economic shocks, thereby contributing to a more predictable investment climate.
Furthermore, as Ghana prepares to scale up green finance, RBR creates a platform for integrating environmental, social, and governance (ESG) considerations into credit and investment decisions. This aligns with global sustainability trends and positions Ghana as a responsible player in the global financial system.
A Strategic and Inclusive Transition
Ghana’s shift to risk-based regulation is not merely a technical adjustment—it is a strategic transformation of the entire financial architecture. For this reform to succeed, all stakeholders must be aligned. Banks need to take full ownership of their internal risk governance frameworks. Boards and executive teams must treat risk management as a strategic function, not a compliance burden.
Regulators, on their part, must adopt a balanced approach—firm in enforcement but supportive in implementation. This includes issuing clear guidelines, engaging stakeholders, and creating platforms for continuous learning and feedback.
Equally important is public awareness. Customers and investors must understand the value of a resilient banking system. When borrowers appreciate the rationale behind more rigorous credit evaluations, and depositors see the safeguards protecting their savings, trust in the banking system deepens.
Ghana must also learn from peer countries with mature RBR models. By collaborating with international institutions and regulatory networks, the country can adapt global best practices to its local context. Opportunities abound in areas like regulatory technology (RegTech) and supervisory technology (SupTech), which can streamline compliance, enhance real-time supervision, and reduce operational burdens.
The adoption of risk-based regulation is a significant milestone in Ghana’s financial sector reform journey. It reflects a maturing regulatory landscape that is more responsive, forward-looking, and globally aligned. While the road ahead will require sustained effort and coordination, the potential benefits—in terms of resilience, investor trust, and inclusive growth—are well worth the investment.