The Bank of Ghana (BoG) has reset the Cash Reserve Ratio on domestic currency deposits for banks from 12 per cent to 14 per cent effective 13th April, 2023.
The Governor of the BoG, Dr Ernest Addison, who stated this at a news conference in Accra on Monday after the 111th regular meeting of the Monetary Policy Committee, said the move was to mop up excess liquidity from the market to tame inflation.
“In addition, the Bank will step up liquidity management operations to address excess liquidity conditions in the market. The Committee will continue to monitor developments in the banking sector and deploy other macro prudential tools to ensure financial stability,” he said.
He stated that the macro-prudential risk assessments conducted during the last MPC meeting indicated increased pressure on profitability and solvency of banks prior to the implementation of the Domestic Debt Exchange Programme (DDEP).
The Chairman of MPC explained that the preliminary data available at the MPC showed that although banks remained liquid, the pre-pandemic capital buffers in the banking sector had been weakened somewhat by the recent macroeconomic challenges and the DDEP.
“These require contingency measures by banks, supported by the regulatory reliefs to contain potential risks to financial stability,” Dr Addison stated.
The Governor said developments in the banking sector broadly reflected the challenging operating environment in 2022 on account of macroeconomic conditions, and the recent implementation of the DDEP, which all 23 universal banks participated in.
He said the preliminary assessment of the impact of the DDEP on the banking sector, based on December 2022 data, indicated significant losses on account of impairment of banks’ holdings in Government of Ghana bonds.
The Governor said impact of the DDEP as currently assessed was moderated by the timely introduction of regulatory reliefs by the BoG to support the banking sector, similar to the reliefs provided to banks at the onset of the Covid-19 pandemic, stressing that “As a result, the industry is still fairly resilient.
“Our preliminary assessment will be updated once banks’ external auditors complete their audits of banks’ 2022 financial performance, making the necessary adjustments to fully reflect
the DDEP impact. Banks are expected to publish their 2022 audited financial statements by the end of April 2023, following a one-month dispensation granted by the Bank of Ghana on the account of the DDEP,” Dr Addison said.
He said the BoG would continue to monitor developments in the banking sector and stand ready to act very swiftly to safeguard the stability of the financial sector.