Professor Peter Quartey, Economist and Director of ISSER
• The newly inaugurated central bank have urged to critically strengthen its regulatory and enforcement mechanisms
• Prof. Quartey says this is necessary to address concerns of loan default rates
• There is already a gap disparity between the monetary policy rate and commercial banks lending rate
The Governing Board of the Bank of Ghana have been urged to critically strengthen its regulatory and enforcement mechanisms.
According to Economist and Director at the Institute of Statistical, Social and Economic Research (ISSER), Prof. Peter Quartey, this is necessary to address the concern of loan default rates of banks in the country.
Prof. Quartey believes the move will also ensure there is a reduction in the high loan default rate to encourage banks to lower their interest rates.
“The focus of the new board should be on ensuring that the Bank of Ghana strengthens its regulatory and enforcement mechanism. If that is done, certainly the loan default rates will drop, which will impact the final cost of funds of banks. We think that the loan default rate is quite high, an average of 19% to 21%,” Prof Quartey explained.
“That is the risk element which has to be factored into the cost of the loan. So, if the Central Bank can enforce its regulatory requirements and ensure that we reduce this high default rate, then banks can reduce their operational costs and be able to reduce interest rates,” he added.
Meanwhile, President Nana Addo Dankwa Akufo-Addo prior to the swearing-in of the newly reconstituted Board of the Central Bank charged its members to interrogate and resolve the issue of high-interest rates charged by commercial banks in Ghana.
The president on his part pointed that it was not right there was still a huge gap disparity in the monetary policy rate of the Bank of Ghana and the commercial banks’ lending rate.