Commercial Banks on Course for Capital Compliance by End-2025
Fitch Ratings has said the vast majority of banks in Ghana are expected to remain capital-compliant when regulatory forbearance on the treatment of losses from the domestic debt exchange programme (DDEP) expires at the end of 2025.
The ratings agency attributed the positive outlook to strong profitability, muted risk-weighted asset growth, and, in some cases, fresh capital injections.
“Ghana’s domestic debt exchange programme (DDEP), which was launched in December 2022 and concluded in 2023, imposed large losses on the banking sector and had a significant impact on banks’ capitalisation given their high exposure to sovereign fixed-income securities,” Fitch stated.
In response, the Bank of Ghana scrapped the 3% capital conservation buffer, cutting the minimum capital adequacy ratio (CAR) to 10% from 13%. It also permitted banks to phase in losses from cedi-denominated government bonds into their regulatory capital evenly over four years, starting end-2022.
Fitch noted that this regulatory relief has allowed most banks to stay capital-compliant and supported confidence in the financial system. No similar forbearance was extended to losses on other restructured instruments, including Eurobonds, given banks’ limited exposure.
Capitalisation Recovery
Fitch observed a marked recovery in the sector’s capitalisation since the DDEP. It estimates that the banking sector’s tangible common equity to tangible assets ratio improved to 10.3% in Q1 2025, from 7.4% at end-2022.
The recovery, it explained, has been underpinned by high interest rates, which drove strong profitability through higher treasury bill yields—excluded from the DDEP. It was also aided by weak credit growth and a more than 40% appreciation of the cedi against the US dollar since end-2024, which reduced the size of foreign-currency assets in cedi terms and boosted solvency metrics.
