BoG proposes 30-day liquidity buffer requirement for banks

The Bank of Ghana (BoG) is set to introduce a new Liquidity Coverage Ratio (LCR) mandate for financial institutions in Ghana to bolster their capacity to handle short-term financial demands amid significant market turmoil. The central bank is currently soliciting input on a proposed Liquidity Coverage Ratio Directive, which is to be finalized after a public consultation phase.

Under the envisaged framework, financial institutions would be obliged to retain a sufficient quantity of high-quality liquid assets that can sustain their liquidity requirements over a 30-day period of intense financial strain. This stipulation aims to fortify banks' resilience against abrupt cash outflows and funding pressures, thereby preventing any potential compromise in fulfilling their obligations.

The proposed directive seeks to establish a prudential benchmark for evaluating banks' liquidity buffers and their resilience to financial disruptions. It may also necessitate banks to reassess their treasury operations, liquidity planning, and the asset mix they hold to align with regulatory standards. The BoG has earmarked November 30, 2026, as the deadline for stakeholder submissions. Comments should be directed to bsdletters@bog.gov.gh.

The BoG anticipates meticulous consideration of all pertinent feedback received and will issue written responses detailing how the comments were incorporated or not, including whether they were integrated into the final directive. The proposed liquidity requirement is part of the BoG's broader initiative to enhance risk management across the banking sector, encompassing measures aimed at mitigating credit risk and non-performing loans.

Additionally, the BoG has formulated a Credit Risk Management Directive intended to dovetail with the Non-Performing Loan Notice issued in the previous year. The proposed Credit Risk Management framework is projected to encompass the entire lending lifecycle, from credit origination and administration to monitoring, measurement, and recovery.

While the credit-risk measures concentrate on the assessment and management of lending exposures, the LCR directive is targeted at ensuring banks maintain adequate liquid assets to fulfill short-term obligations during periods of financial stress.

Collectively, these proposed measures are poised to address two pivotal aspects of banking-sector resilience: the management of credit portfolios and the ability to withstand liquidity pressures. The consultation period offers stakeholders an opportunity to raise implementation challenges and propose adjustments before the liquidity directive is finalized.