Ghana's banking sector at risk: Over-subscription of govt bonds and high cash reserve ratios

A new report by Banking Consultant Dr. Richmond Atuahene and Data and Research Analyst Isaac Kofi Agyei has revealed a potential crisis brewing in Ghana's banking sector.

Banking Consultant Dr. Richmond Atuahene is one of the authors of the report.

The report, titled 'Thirsty Banks: Ghana's 2023 Challenge with High Cash Reserve Ratios,' highlights the excessive subscription of government bonds as a significant concern for many banks.

The report reveals that a substantial portion of commercial banks' total deposits, amounting to GH¢224 billion, has been allocated towards the acquisition of government bonds following the domestic debt exchange programme.

With a prolonged maturity period of these bonds set for 2031, banks face the risk of depleting their resources, leading to insufficient liquidity for day-to-day operations.

The authors of the report argue that the Bank of Ghana's new, higher Cash Reserve Ratios (CRR) do not factor in the restructured bonds held by commercial banks, primarily funded by depositors' money. This oversight could lead to a depletion of resources for many banks, causing them to become illiquid.


The report recommends that the Bank of Ghana should reconsider CRR reductions and mitigate Non-Performing Loans (NPL) to restore resilience and economic stability in the banking sector. The authors emphasize a balanced approach, urging BoG to factor in restructured bonds and mitigate NPL risks.

Furthermore, the report highlights the need for fiscal measures, including substantial budget cuts, to ease inflationary pressures and redirect credit to the private sector. This holistic strategy aims to restore banking sector resilience, promote economic stability, and foster sustainable growth in Ghana.

The report also highlights the urgent need for the Bank of Ghana to reconsider its policies to prevent a potential crisis in Ghana's banking sector.



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