Bank of Ghana to Gradually Review Cash Reserve Ratio for Commercial Banks
The Governor of the Bank of Ghana, Dr. Johnson Asiama, has announced that the central bank is committed to reviewing the current Cash Reserve Ratio (CRR) for commercial banks.
However, he emphasized that any adjustments must be made gradually to prevent economic disruptions.
“We recognise the impact of the Cash Reserve Ratio on commercial banks and intend to review it critically,” Dr. Asiama stated, assuring that “any adjustments must be phased to avoid unintended economic consequences.”
His remarks were in response to an appeal from the Governing Council of the Ghana Association of Banks (GAB) during a meeting aimed at fostering dialogue between banks and regulators to build trust and consensus on key financial policies.
Background on Cash Reserve Ratio Adjustments
In March 2023, the Bank of Ghana increased the cash reserve ratio on local currency deposits for banks from 12% to 14% as part of efforts to mop up excess liquidity in the financial system.
During the recent meeting, commercial banks appealed to the central bank to review the CRR, arguing that it was limiting financial intermediation and increasing banking costs.
The discussions also covered Ghana’s credit rating challenges and their impact on correspondent banking relationships. GAB members called for an upward revision of Nostro and affiliate exposure limits to ease constraints on international transactions.
Dr. Asiama acknowledged the difficulties banks face in securing new correspondent banking relationships and committed to further assessing the situation.
Regulation of Foreign Exchange and Money Transfer Operators
The GAB Governing Council urged the Bank of Ghana to discontinue the mandatory sale of foreign exchange proceeds from mining and oil companies to the central bank.
They argued that allowing these proceeds to flow through the banking system would improve foreign exchange price discovery. Dr. Asiama assured them of his commitment to further engagement on the request.
Additionally, the Governor stated that the central bank is working to review the operations of Money Transfer Operators (MTOs) and urged commercial banks to cooperate in streamlining the sector for greater transparency.
He noted the growing influence of MTOs and fintech companies in the remittance business and addressed concerns about regulatory gaps that could lead to foreign exchange losses for the country.
Special Dispensation for Commercial Banks and Agricultural Financing
Dr. Asiama also announced the central bank’s commitment to extending the special dispensation granted to commercial banks during the Domestic Debt Exchange Programme (DDEP).
This assurance followed concerns from banks over the expiration of the special dispensation on restructured cocoa bonds under the DDEP, which is set to end in April 2025. Banks expressed fears that market illiquidity and COCOBOD’s financial position might make it difficult to sell these bonds.
On the issue of rising non-performing loans, Dr. Asiama emphasised the role of fiscal policy in reducing inflation and interest rates.
He also reaffirmed the Bank of Ghana’s commitment to doubling agricultural financing and supporting the Ghana Incentive-Based Risk-Sharing System for Agricultural Lending (GIRSAL) in raising additional guarantee funds.
However, he urged commercial banks to take the lead in stakeholder engagements to improve and de-risk selected agricultural value chains.
