The Bank of Ghana (BoG) is set to introduce a Liquidity Coverage Ratio (LCR) requirement for banks to enhance their ability to meet short-term financial obligations during periods of significant market stress. This move is part of the central bank's efforts to strengthen risk management across the banking sector. The proposed framework would require banks to maintain adequate high-quality liquid assets to cover their liquidity needs over a 30-calendar-day period of significant financial stress.
The BoG has invited banks, industry stakeholders, and members of the public to submit comments on the proposed Liquidity Coverage Ratio Directive before it is finalised. The consultation is being conducted in accordance with the BoG's Procedures for Issuance of Directives, 2020. The central bank has set November 30, 2026, as the deadline for submissions, and comments can be sent to [email protected].
The proposed directive would establish a prudential benchmark for assessing banks' liquidity buffers and resilience to financial shocks. It could also require banks to review their treasury operations, liquidity planning, and the composition of assets held to meet regulatory requirements. This move is expected to help banks withstand sudden cash outflows and funding pressures without compromising their ability to meet obligations.
The proposed liquidity requirement forms part of broader efforts by the Bank of Ghana to strengthen risk management across the banking sector. The central bank has also outlined a Credit Risk Management Directive intended to complement the Non-Performing Loan Notice issued last year. This directive is expected to cover the entire lending process, from credit origination and administration to monitoring, measurement, and recovery.
The proposed framework is expected to address two key areas of banking-sector resilience: the management of credit portfolios and the capacity to withstand liquidity pressures. The consultation period will allow stakeholders to raise implementation concerns and recommend adjustments before the liquidity directive is finalised. The BoG says it will consider all material feedback received and provide written explanations indicating how the comments were addressed.
The Credit Risk Management Directive is expected to be implemented from July 1, 2027. The BoG is also planning reviews of banks' cybersecurity compliance and has cautioned financial institutions about cross-border lending and foreign currency exposures. These measures are part of the central bank's efforts to strengthen the banking sector and prevent financial instability.
The BoG's proposed liquidity buffer requirement is part of a broader effort to strengthen the banking sector and prevent financial instability. The central bank's measures are expected to enhance the resilience of banks and prevent a recurrence of financial crises. Key stakeholders will be monitoring the implementation of these measures to ensure that they achieve their intended objectives.
Key points
- The Bank of Ghana proposes a 30-day liquidity buffer requirement for banks to strengthen their ability to meet short-term financial obligations.
- The proposed framework would require banks to maintain adequate high-quality liquid assets to cover their liquidity needs over a 30-calendar-day period of significant financial stress.
- The consultation period for the proposed directive will end on November 30, 2026.
