BoG to Review Cash Reserve Ratio Amid Industry Pressure

Accra, Ghana - 22 Feb, 2025 - The Bank of Ghana is considering a review of the Cash Reserve Ratio (CRR) for commercial banks, signaling a potential shift in policy to balance financial stability and liquidity needs.

Governor Dr. Johnson Asiama revealed the central bank's intentions during a meeting with the Ghana Association of Banks, where industry challenges were discussed.

“We recognize the impact of the Cash Reserve Ratio on commercial banks and intend to review it critically.''

“However, any adjustments must be phased to avoid unintended economic consequences.''

“We understand the difficulties banks face in maintaining correspondent relationships and will assess measures to address these concerns,'' he remarked.

The CRR, currently at 14%, has been a contentious issue among banks, which claim that the higher reserve requirement hampers financial intermediation and increases operational costs. The central bank had previously raised the ratio from 12% in March 2023 to tighten liquidity and stabilize inflation.

While banks have been pushing for a downward revision to ease lending constraints, the Bank of Ghana is exercising caution. Any adjustments to the CRR will be phased to avoid unintended economic consequences, with consideration given to broader macroeconomic stability.

Key Issues Discussed:

- Cash Reserve Ratio (CRR) Review: A potential review of the CRR to balance financial stability and liquidity needs.
- Credit Rating Challenges: Ghana's credit rating challenges and their impact on correspondent banking relationships.
- Nostro and Affiliate Exposure Limits: Adjusting limits to ease pressure on international transactions.

The Bank of Ghana aims to address these challenges while maintaining macroeconomic stability and avoiding market volatility.

Source: Lead News Online