By Issah Olegor
The banking sector is bracing for a major liquidity squeeze following a surprise decision by the Bank of Ghana (BoG) to amend the country’s Cash Reserve Ratio (CRR) regime, a move financial analysts believe could temporarily stabilise the cedi while placing fresh pressure on commercial banks.
According to a new report by IC Insights, the Central Bank’s latest policy adjustment is expected to mop up more than GH¢16 billion from the banking system into unremunerated reserves while simultaneously releasing about US$1.4 billion previously held under foreign currency reserve requirements.
Analysts say the measure is likely to trigger increased demand for the cedi in the interbank market as banks rush to realign their liquidity positions ahead of the June 4, 2026 implementation deadline.
The development marks a major shift from the dynamic CRR system introduced two years ago, under which banks maintained varying reserve requirements depending on their loan-to-deposit ratios and currency composition of deposits.
Under the revised framework, however, all banks will now be required to maintain a uniform 20 percent reserve ratio exclusively in Ghana cedis, regardless of whether customer deposits are held in foreign currency or local currency.
Financial market watchers say the decision effectively reverses a policy introduced about a year ago that allowed banks to hold reserves in the same currency as the underlying deposits. Analysts believe the BoG’s latest intervention is aimed at tightening cedi liquidity within the economy to help reduce pressure on the foreign exchange market and support recent gains made by the local currency.
IC Insights explained that banks holding significant foreign currency deposits would now be compelled to convert portions of those reserves into cedis in order to meet the new reserve requirements.
The report estimates that this process alone could absorb over GH¢16 billion from circulation, a development expected to ease short-term exchange rate pressures if global fuel import costs remain stable.
The policy is also expected to reduce the Bank of Ghana’s own sterilisation costs.
Over the years, the Central Bank has relied heavily on Open Market Operations (OMO) instruments to absorb excess liquidity from the system, a process that often comes with high interest costs.
Analysts say forcing banks to hold larger non-interest-bearing reserves could reduce the need for such expensive interventions.
However, while the measure may offer short-term monetary stability, banking industry players are already expressing concerns about the potential impact on profitability and lending operations.
According to IC Insights, banks with large foreign exchange deposits but limited cedi liquidity are likely to face significant stress under the new arrangement.
The report specifically identified banks such as Societe Generale Ghana, SG Bank which previously benefited from a lower CRR requirement of 15 percent due to its higher loan-to-deposit ratio, as institutions that could face a heavier reserve burden under the uniform 20 percent policy. Analysts warn that the tighter reserve obligations could reduce the amount of funds available for lending and other income-generating investments.
The latest policy intervention comes at a time Ghana’s financial sector is still adjusting to the aftershocks of recent economic reforms, high inflationary pressures and efforts by the Central Bank to stabilise the cedi after months of volatility.
Since 2023, the BoG has implemented a series of monetary tightening measures, including aggressive interest rate hikes and liquidity controls, in a bid to restore macroeconomic stability.
While some economists believe the CRR amendment could support exchange rate stability in the short term, others caution that prolonged liquidity tightening may slow private sector credit growth and increase the cost of doing business for financial institutions.
