Hidden charges: BoG cracks down on banks

The Bank of Ghana has moved decisively to protect consumers from exploitative banking practices, announcing a two per cent cap on Optional Issuer Fees for cross-currency card transactions while demanding mandatory disclosure of all charges before customers complete their transactions. 

The consumer protection measures, which were announced by the Governor, Dr Johnson Asiama, during a meeting with bank CEOs, were aimed at curbing what is described as "opaque pricing" that has eroded public trust in Ghana's payment systems.

He said the era of hidden fees and surprise charges was over, cautioning that consumer protection failures threaten the integrity of the entire financial system. 

The governor's announcement specifically targets Optional Issuer Fees (OIFs) on cross-currency card transactions, which have become a significant source of customer complaints as Ghanaians increasingly use cards for international purchases and travel.

OIFs on cross-currency transactions have become increasingly lucrative for banks as more Ghanaians shop online from international retailers and travel abroad for business and leisure. The fees, typically ranging from 1 per cent to 4 per cent of transaction value, are often not clearly disclosed at the point of sale, leading to customer surprise and frustration when charges appear on statements.

The new directive will require banks to cap OIFs at 2 per cent of transaction value while mandating full disclosure of all applicable fees to customers before any transaction is completed. 

This represents a fundamental shift from current practices where many customers discover additional charges only after transactions have been processed, often leading to disputes and damaged customer relationships.

Dr Asiama acknowledged that banks might face legitimate costs in processing cross-currency transactions, stating that "in principle, we recognise that these fees may reflect real costs." 

However, he emphasised that opaque pricing and limited disclosure have created an unacceptable situation where customers cannot make informed decisions about their financial transactions.

The governor's criticism extended beyond card transaction fees to encompass broader pricing practices that have drawn regulatory scrutiny. 

He condemned banks that continue charging interest on inactive credit accounts, describing situations where accrued interest exceeds the original principal amount as "unacceptable" practices that "distort customer outcomes."

These pricing abuses, according to the central bank governor, not only harm individual customers but also misrepresent the true profitability of lending portfolios and violate fundamental principles of fair treatment and transparency. 

Cash reserve ratio 

At the last MPC, Dr Asiama announced that commercial banks will now be required to maintain their mandatory cash reserves in the same currencies as their corresponding deposits, effective June 5.

Reserves for foreign currency deposits will have to be maintained in foreign currency while reserves for cedi-denominated deposits will be maintained in the local currency.

The Cash Reserve Ratio, which requires banks to hold a certain percentage of their deposits as reserves with the central bank, has been a key tool in Ghana's monetary policy arsenal for controlling liquidity and inflation. 

The Bank of Ghana introduced the Dynamic CRR system to provide more flexibility in managing money supply fluctuations, allowing for automatic adjustments based on predetermined economic indicators. 

However, recent economic pressures, including persistent inflation and foreign exchange challenges, have prompted the central bank to recalibrate this mechanism multiple times. 

The BoG in 2024 introduced a new Cash Reserve Ratio (CRR) regime that links CRR requirements to loans-to-deposit ratios (LDRs).

This was part of efforts to mop up what the regulator described as excess liquidity.

The new regime includes: 25 per cent CRR for banks with Loan Deposit Ratios (LDR) below 40 per cent, 20 per cent for banks with LDRs between 40 per cent and 55 per cent, and 15 per cent for banks with LDRs above 55 per cent.

During the meeting with the bank CEOs, Dr Asiama emphasised that the new CRR structure emerged after "careful internal deliberation and consultations" with bank leaders who had expressed concerns about the previous system. 

The central bank governor noted that the revised approach aims to better align liquidity management with funding structures while enhancing.

discipline in the foreign exchange market, a critical concern given Ghana's ongoing currency stability challenges.

Digital lending 

The Governor also announced a new directive that promises comprehensive digital lending guidelines by August 2025, addressing what he characterised as an urgent and necessary intervention.

He painted a troubling picture of vulnerable Ghanaians, particularly young people and informal workers, being exploited by predatory online lending platforms that use harassment, threats and scams to collect debts.

The forthcoming digital lending framework will establish clear rules around licensing, interest rate transparency, data protection and ethical collection practices. 

Dr Asiama emphasised the dual goal of protecting borrowers from exploitation while enabling responsible digital lenders to thrive in a well-regulated environment. 

Banks active in digital lending, whether directly or through fintech partnerships, were advised to begin compliance preparations immediately.

Tackling high NPLs

To address the high non-performing loans ratio in the industry, the Governor announced comprehensive measures that will mandate write-offs of fully provisioned loans with no realistic recovery prospects, while capping NPL ratios at 10 per cent of gross loans by December 2026. 

The directive also tightens restructuring rules and enforces timely collateral recovery for overdue loans.

Perhaps most significantly, the NPL directive will require banks to publicly disclose blacklisted wilful defaulters in their audited financial statements, along with sectoral breakdowns of NPL exposures. 

This transparency measure aims to sharpen both regulatory and investor focus on systemic credit risks while creating additional pressure for loan recovery efforts.

Governance concerns 

Dr Asiama also announced a new directive that aims to address governance concerns in foreign-owned banks operating in Ghana. 

He expressed concern about the outsourcing of major credit and risk decisions to offshore principals who fall outside Ghana's regulatory oversight, with local boards serving merely as "rubber stamps" for externally made decisions.

The new governance directive will require local boards and management teams to retain genuine authority over all material credit decisions and risk management actions taken in Ghana.

Prior approval from the Bank of Ghana will be required before any delegation of key decision-making functions to foreign entities, representing a significant shift in how multinational banks operate in the country.

Dr Asiama was particularly emphatic about this governance issue, stating that "Ghana-based boards must not serve as rubber stamps for instructions issued from offshore." 

He warned that such practices undermine effective governance and create unacceptable regulatory blind spots that could threaten financial stability