Banks to hold reserves in original deposit currencies from June

Commercial banks operating in the country will now be required to maintain cash reserves in the same currency as the deposits they hold.

This is a key policy adjustment as the Bank of Ghana (BoG) amends its Dynamic Cash Reserve Ratio (CRR) framework.

The revision is to deepen financial sector stability and enhance monetary policy transmission and takes effect from June 5, 2025.

Currently, banks hold all reserves in domestic currency to tighten liquidity and stabilise inflation.

It has been a point of contention among banks, which argue that the requirement limits financial intermediation and increases operational costs.

But what this revised policy means is that, foreign currency deposits must now be backed by foreign currency reserves. Reserves for cedi deposits will also be held in the local currency.

What the Central Bank is seeking to do is to reduce currency mismatches on the balance sheets of banks and minimise risks in the sector for macro-economic stability.

“The Committee decided to amend the Dynamic Cash Reserve Ratio (CRR) as follows: The CRR for all banks will now be maintained in their respective currencies. This means that foreign currency reserves for foreign currency deposits and domestic currency reserves for domestic currency deposits. This policy measure will become effective on June 5, 2025”, Governor, Dr. Johnson Asiama announced as an additional policy measure.

The directive was one of outcomes of the Monetary Policy Committee’s (MPC) May 2025 meeting, which also saw the benchmark policy rate held steady at 28%.

This policy retention is a cautious stance amid lingering inflationary pressures despite recent improvements in currency stability and macroeconomic indicators.

It is to further anchor inflation expectations over fears that price pressures could resurface in the second half of the year.

“The latest forecast points to continued easing of inflationary pressures on the back of tight monetary policy stance, exchange rate stability, and fiscal consolidation. Inflation is expected to ease faster towards the medium-term target in the first quarter of 2026 as opposed to the second quarter as earlier envisaged, barring unanticipated shocks”.

“Despite these positive developments, the committee observed that the current level of inflation remains high relative to the medium-term target and will require maintaining the policy rate at 28.0%, the Governor said.