By Adnan Adams Mohammed
The Bank of Ghana (BoG) has issued a wake-up call to commercial banks, warning that their heavy reliance on government securities and interest income could undermine profitability as the country enters a cycle of lower interest rates.
The Governor of the Bank of Ghana, Dr. Johnson Pandit Asiama, delivered the warning following the latest benchmark interest cut announced at the 128th Monetary Policy Committee (MPC) meeting in January. He noted that while macroeconomic stability has been restored, the banking sector must now undergo structural adjustments to survive a low-yield environment.
For years, Ghanaian banks have sustained high earnings by investing heavily in sovereign instruments (Treasury bills and bonds). However, with inflation plummeting from 23.8% in December 2024 to a historic low of 3.8% in January 2026, the central bank has aggressively cut its policy rate to 15.5%.
This shift has triggered a sharp decline in money market yields. The 91-day Treasury bill, for instance, recently dropped to 8.61%, down from over 11% at the start of the year.
“There is nothing inherently problematic about net interest income,” Dr. Asiama told bank CEOs. “However, a high dependence on it increases sensitivity to interest rate cycles and sovereign exposure dynamics.”
A BoG thematic review revealed that approximately 68% of industry profitability is currently driven by net interest income, while actual loans to the private sector account for less than one-fifth of total industry assets.
Call for diversification
To mitigate the risk of shrinking margins, the Governor urged banks to pivot toward: fee-based income by strengthening transactional banking, trade services, and digital payments; private sector lending by expanding credit to productive sectors like agriculture, manufacturing, and SMEs; and treasury operations, diversifying revenue streams through more sophisticated treasury management rather than passive sovereign investment.
Dr. Asiama emphasized that “stability must now translate into purposeful intermediation,” adding that the BoG will now embed business model analysis into its supervisory framework to catch vulnerabilities early.
Modernizing the financial perimeter
The Governor also touched on legislative reforms intended to modernize the sector. These include the Bank of Ghana Amendment Act 2025, which bolsters the central bank’s independence, and the Virtual Asset Service Providers Act, which brings digital assets under formal oversight.
“We are not creating a parallel financial system. All we are doing is extending the perimeter of the existing one,” Dr. Asiama explained, noting that banks will soon play a key role in settling transactions for regulated virtual asset providers.
Outlook for the sector
Despite the warning, the Governor remained optimistic about the broader economy, citing a 6.1% GDP expansion in 2025 and strengthening foreign reserves. However, he maintained that the “next phase” of the sector’s development would be defined by how quickly banks can move away from being “sovereign-driven” to becoming true engines of private-sector growth.
The central bank also inaugurated a steering committee to encourage more banks to list on the Ghana Stock Exchange (GSE), a move intended to broaden ownership and improve corporate governance across the industry.
