BoG Adjusts Banks’ Cash Reserve Ratio

 

The Central Bank announced Monday it has decided to adjust the Cash Reserve Ratio (CRR) for banks.

Governor of the Bank of Ghana and Chairman of the Monetary Policy Committee (MPC), Dr. Ernest Addison, who disclosed this to the media in Accra, said banks with Loan-to-Deposit ratio above 55 percent will have to meet a CRR of 15 percent, while those with Loan-to-Deposit ratio between 40 percent to 55 percent will have to meet a CRR of 20 percent.

Also, he said banks with Loan-to-Deposit ratios below 40 percent will be required to hold a CRR of 25 percent adding such policy measures take effect from April 2024.

Speaking further, Dr. Addison said banks’ liquidity and profitability positions have continued to improve.

“Out of a total of 23 banks, more than half are fully capitalised and have no need for recapitalisation” adding most of the outstanding banks have met more than two thirds of the required recapitalisation over a three-year period within one year as at the end of 2023,” he noted.

The banking sector’s performance, according to him, has rebounded after the implementation of the Domestic Debt Exchange Programme (DDEP) revealing that in the first two months of 2024, total assets of the banks increased by 21.0 percent, while total deposits and advances rose by 25.5 percent and 1.8 percent, respectively.

He continued that trends in key financial soundness indicators were mixed, stating that the Capital Adequacy Ratio, adjusted for reliefs, was 13.6 percent in February 2024, above the regulatory minimum threshold of 13.0 percent, compared with 12.6 percent in February 2023.

“Liquidity and profitability ratios also improved compared to a year earlier. The non-performing loan (NPL) ratio, on the other hand, increased to 24.6 percent, reflecting the downgrading of several large exposures to the banks. “Non-performing loans excluding loss category, however, remained in single digits at 9.8 percent.

“Banks impacted by the DDEP in 2023 continue to implement their approved capital restoration plans in line with BoG’s requirements.

“The Bank of Ghana expects that early completion of re-capitalisation efforts will lead to more resilience of the banking sector and position it to provide stronger support for real sector recovery,” he stressed.

By Samuel Boadi