Banks must learn to manage risk, not avoid lending – BoG Governor

Bank of Ghana (BoG) Governor Dr. Johnson Pandit Asiama has urged banks to focus on managing risk effectively rather than shying away from lending, stressing that prudent risk-taking is essential to financing economic growth.

Speaking at the Bank of Ghana and Chartered Institute of Restructuring and Insolvency Practitioners (CIRIP) Ghana Forum on Non-Performing Loans and Post-Commencement Financing in Accra on Tuesday, August 4, Dr. Asiama said the country’s financial system should be built to assess, price and manage risk rather than avoid it altogether.

He noted that while lending inevitably involves risk, financial institutions must make sound commercial decisions that support viable businesses without compromising financial stability.

“Our objective is not a system that avoids risk. Such a system would finance nothing worth financing,” he said.
Instead, the Governor called for a banking system that understands and manages risk appropriately.

“It is a system that understands risk, prices it properly, manages it actively and holds the capacity to absorb losses when judgement proves wrong.”

Dr. Asiama said business rescue and financial stability should not be viewed as competing objectives, arguing that both can be achieved when lending decisions are grounded in transparency, accountability and commercial viability.

“Business rescue and financial stability are compatible objectives, but rescue must rest on commercial viability, transparency and accountability, and never on concealed losses or regulatory forbearance.”

He stressed that banks should continue applying sound credit judgment while ensuring that financing decisions are based on credible assessments of borrowers’ ability to recover and sustain operations.

According to the Governor, a resilient financial system is one that enables lenders to distinguish between businesses with realistic recovery prospects and those that are no longer commercially viable, allowing credit to flow to productive sectors of the economy while safeguarding depositors and the broader financial system.