This will be achieved by undertaking periodic thematic loan book reviews of banks to ensure that losses are fully recognized early and accounted for.

In the 2024 Financial Stability Review, the Central Bank stated that the banking industry’s resilience to heightened credit risk, following the full impact of the debt restructuring, is relatively weak.

“Non-performing loans remain elevated, reflecting the lagged effects of the COVID-19 pandemic and the recent macroeconomic challenges. The stress test revealed that if the macroeconomic recovery is largely slow-paced, leading to a mild deterioration in credit quality, the Capital Adequacy Ratio (CAR) may reduce further over a one-year horizon.”

“Solvency conditions could marginally decrease below 10% if macro-financial conditions one year ahead lead to severe deterioration in credit quality,” it added.

The results, the Central Bank indicated, reinforce the need to ensure a robust macroeconomic recovery in the near to medium term.

To contain credit risks, it explained that banks must maintain a sound credit risk management system and adhere to the Bank of Ghana directive on suspending dividend payments while frontloading recapitalization plans.

The credit risk stress test estimates the sector’s solvency position following an extreme but plausible deterioration in the quality of loan assets. The impact of the decline in credit quality on the solvency position is estimated using the loan migration model.

The loan migration model stresses banks’ loan portfolios by reclassifying loans to reflect a higher degree of loan impairments under the following assumptions.

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Similarly, the Three-Tier Pension Scheme’s AUM at the end of December 2023 stood at GH¢61.8 billion as compared to GH¢46.6 billion recorded in 2022.

According to the Financial Stability Review, pension funds increased by 33.0% in 2023, compared to the 20% h recorded in 2022.

The increase in growth, the report said, is attributable to the outcome of the alternative offer to pension funds which saw a high participation rate of about 95.0%, as well as the government’s commitment to meeting its payments obligations under the offer.

Also, the government’s partial redemption of contributions and the prosecution of employers defaulting on the mandatory pension schemes contributed to the surge in AUM.

Private Pension Fund

The Private Pension Funds was the main driver of the growth witnessed in the industry.

Total private pension funds grew by 32.0% in 2023 compared to 26.0% recorded in 2022.

The year-end total for private pension funds under management for 2023 was GH¢46.5 billion compared to GH¢ 35.3 billion recorded in 2022. The sustained growth in pension funds is attributable to better return on investments and the prosecution of employers defaulting on Tier 2 contributions.

Public Pension Funds

The pension funds under the Basic National Social Security Scheme (BNSSS) grew relatively stronger compared to the recent past.

From a total AUM of GH¢12.11 billion in 2022, the year-end AUM for 2023 was GH¢15.30 billion arising from payment of contribution arrears by the government.

This represented a 26.3% increase in 2023, compared to a 4.9% increase in 2022.

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