Develop robust framework to rescue viable distressed firms – Governor urges CIRIP

Governor of the Bank of Ghana, Dr. Johnson Pandit Asiama, has called for the creation of a strong and predictable framework to help financially distressed but viable companies restructure, rather than face liquidation. He emphasized the need for a system that allows banks to support legitimate business turnarounds while protecting depositors, ensuring financial stability, and upholding prudent lending practices.

Speaking at a forum in Accra organized by the Bank of Ghana and the Chartered Institute of Restructuring and Insolvency Practitioners (CIRIP) Ghana, Dr. Asiama stated, "Our objective is not a system that avoids risk. Such a system would finance nothing worth financing. We need a system that understands risk, prices it properly, manages it actively and has the capacity to absorb losses when judgement proves wrong."

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Our objective is not a system that avoids risk. Such a system would finance nothing worth financing. We need a system that understands risk, prices it properly, manages it actively and has the capacity to absorb losses when judgement proves wrong.

While Ghana's Corporate Insolvency and Restructuring Act, 2020 (Act 1015) provides a legal basis for rescuing distressed businesses and prioritizes post-commencement financing, Dr. Asiama noted the challenge lies in translating these provisions into practical financing that banks can confidently offer. He stressed that rescue financing should be reserved for businesses with credible recovery prospects, supported by realistic restructuring plans, transparent governance, and sustainable cash flow projections.

Dr. Asiama cautioned that new financing should not be used to mask existing losses or compromise prudential standards. He highlighted positive trends in Ghana's banking sector, with the Non-Performing Loans (NPL) ratio dropping from 23.1% in June 2025 to 16.1% in June 2026, and the Capital Adequacy Ratio standing at 20.4%. However, Felix Addo, President of CIRIP Ghana, expressed disappointment that only five companies have utilized the business rescue law since its inception, attributing this low uptake primarily to the lack of post-commencement financing and limited public awareness.

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The need for money is not evidence of viability. Most distressed companies need money. The real question is whether fresh capital can reasonably restore the business to sustainable operations.