The Bank of Ghana (BoG) has proposed a new liquidity requirement that would compel banks to hold enough readily accessible assets to withstand 30 days of severe financial stress without relying on emergency funding.
Under the proposed Liquidity Coverage Ratio (LCR) Directive, banks would be required to maintain a minimum LCR of 100%, ensuring that their high-quality liquid assets are sufficient to cover projected net cash outflows over a 30-day stress period.
The directive is expected to take effect on September 1, 2027, with banks required to align their internal policies, systems and processes by August 31, 2027. The central bank has invited industry stakeholders and members of the public to submit comments on the exposure draft by November 30, 2026.
The proposal forms part of Ghana’s broader efforts to strengthen the resilience of the banking sector following previous financial sector reforms. While capital adequacy measures a bank’s ability to absorb losses, the LCR focuses on whether it can meet its immediate obligations when depositors withdraw funds, lenders refuse to renew financing or customers draw on existing credit facilities.
A bank may remain solvent on paper but still collapse if it cannot raise cash to meet payments when they fall due. The BoG said the proposed framework draws lessons from the 2007 global financial crisis, when several institutions encountered severe liquidity challenges despite appearing adequately capitalised.
“The role of banks in financial intermediation involves the maturity transformation of short-term deposits into long-term loans, which makes banks vulnerable to liquidity risk,” the central bank said.
Under the proposed framework, the LCR would be calculated by dividing a bank’s stock of unencumbered high-quality liquid assets by its projected net cash outflows over 30 days. A ratio of 100% means a bank must have GH¢1 in qualifying liquid assets for every GH¢1 of expected net cash outflow under the regulatory stress scenario.
The stress test would account for several potential shocks, including withdrawals of retail deposits, reduced access to unsecured wholesale funding, disruptions to short-term secured financing, increased collateral requirements and customers drawing down unused credit facilities. It would also assume that a bank’s public credit rating could be downgraded by as many as three notches, potentially triggering additional collateral demands and funding withdrawals.
Banks would be required to maintain the minimum ratio continuously and conduct their own stress tests based on their business models, funding arrangements and risk exposures. The BoG could also impose a higher requirement on an individual institution if its liquidity profile presents greater risks.
A major feature of the proposal is the classification of eligible liquid assets, which could influence how banks allocate their funds between government securities and private-sector lending.
Level 1 assets, which would face no regulatory haircut and would not be subject to a quantitative cap, include physical cash, balances held with the BoG above mandatory cash reserve requirements, and marketable securities issued or guaranteed by the government or central bank.
The favourable treatment of government securities could reinforce their position as a preferred investment for banks. Such instruments already provide interest income, can serve as collateral and offer regulatory advantages.
For the government, the proposed rules could strengthen institutional demand for Treasury bills and bonds, potentially supporting domestic borrowing and secondary-market activity.
However, the impact on private-sector credit remains a concern. If banks increase their holdings of government securities to meet the liquidity requirement, some may have less room to expand lending to businesses, particularly where loans are considered riskier or cannot easily be converted into cash during periods of stress.
The directive does not require banks to reduce lending, but its incentives could encourage institutions to favour liquid sovereign assets over longer-term private-sector loans. The extent of any impact on credit growth and lending rates would depend on banks’ existing liquidity positions and the adjustments needed to comply.
The proposal also allows certain corporate debt securities, covered bonds, residential mortgage-backed securities and equities to qualify as liquid assets, although strict eligibility conditions and regulatory haircuts could limit their usefulness.
Level 2 assets would be capped at 40% of total high-quality liquid assets after haircuts, while Level 2B assets would be limited to 15%. Qualifying Level 2A assets would attract a minimum haircut of 15%.
Corporate debt securities and covered bonds would need a long-term credit rating of at least AA- and must trade in large, deep and active markets with a demonstrated record of liquidity during stressed conditions. Level 2B corporate securities would face a 50% haircut and require ratings between A+ and BBB-, while eligible residential mortgage-backed securities would attract a 25% haircut.
Common equities would also face a 50% haircut and must meet strict conditions, including inclusion in the GSE Composite Index and trading in a sufficiently active market.
Although these provisions could encourage the development of Ghana’s capital market, the limited supply of rated corporate securities and relatively low trading activity in many listed shares could make it difficult for banks to rely significantly on such instruments.
Cash, excess central bank balances and government securities are therefore likely to remain the main components of many banks’ liquidity buffers. Over time, however, the framework could encourage corporate issuers to improve financial disclosure, obtain credit ratings and strengthen secondary-market trading to attract institutional investors.
Another significant provision concerns deposits accessible through internet and mobile banking. The BoG proposes an additional four-percentage-point run-off rate for digitally enabled retail and micro, small and medium-sized enterprise deposits.
Stable retail deposits that are fully insured and linked to established or transactional relationships would generally attract a 5% run-off rate, while less stable deposits would attract 10%. The additional digital factor could increase the proportion of such deposits banks must assume will leave during a stress event.
The proposal reflects concerns that digital banking allows customers to transfer money rapidly, potentially accelerating withdrawals when confidence in a financial institution weakens.
However, it could also increase compliance costs for banks with large mobile and online banking customer bases. The central bank may need to clarify how the additional factor would apply across different deposit categories and whether all digitally accessible funds should receive the same treatment regardless of actual customer behaviour.
The directive also distinguishes between funding sources according to their expected stability. Operational deposits linked to services such as clearing, custody and cash management would generally attract a 25% run-off rate, subject to qualifying conditions.
Non-operational deposits from large non-financial companies, sovereign entities, central banks and public-sector institutions would attract a 40% rate, while certain other legal-entity funding could be assigned a 100% outflow assumption.
These classifications could influence banks’ deposit mobilisation strategies. Institutions relying heavily on a small number of large corporate customers may face higher liquidity pressures than banks funded by a broad base of retail depositors.
As a result, banks could intensify efforts to attract salary accounts, insured retail deposits and customers who maintain regular transactional balances. Institutions may also reassess the cost of attracting large short-term corporate deposits if those funds carry higher regulatory outflow assumptions.
The proposed rules would further limit the extent to which banks can rely on expected cash inflows to meet their liquidity requirements. Recognised inflows would be capped at 75% of projected cash outflows, meaning banks must maintain high-quality liquid assets equivalent to at least 25% of gross outflows regardless of anticipated loan repayments.
Only contractual inflows from fully performing exposures would qualify. For retail and MSME loans, banks would generally be allowed to recognise 50% of contractual payments due within 30 days, reflecting the expectation that some repayments would be used to finance new lending.
Banks would also be prohibited from assuming that committed credit or liquidity facilities provided by other institutions would necessarily be available during a stress period.
The approach is designed to ensure that banks hold sufficient liquidity before a crisis rather than depend on funds that may not materialise when financial markets come under pressure.
Under the proposed framework, banks would conduct LCR stress scenarios at least weekly and submit monthly returns to the BoG after the pilot period. Any institution whose ratio falls, or is expected to fall, below 100% would have to notify the central bank immediately, explain the reasons and outline measures to address the shortfall.
During periods of market stress, the BoG could increase reporting frequency to weekly or daily.
Banks would also be required to disclose their LCR in annual audited financial statements and quarterly unaudited accounts. The disclosures would cover the composition of liquid assets, funding concentration, currency mismatches, derivative exposures and the main factors behind changes in the ratio.
The reporting requirements could improve transparency by giving depositors, investors and analysts a clearer picture of banks’ ability to meet short-term obligations. However, institutions reporting significantly weaker ratios than their peers could face additional scrutiny, even when they remain above the regulatory minimum.
While the proposed regime is intended to strengthen financial stability, compliance could come at a cost. Liquid assets generally generate lower returns than private-sector loans, meaning banks required to increase their buffers could experience pressure on their interest margins. Some institutions may respond by adjusting lending rates, introducing or increasing fees, or becoming more selective in extending credit.
The preferential treatment of government securities could also deepen the relationship between banks and the sovereign, potentially affecting how financial resources are distributed across the economy.
The central policy challenge will be to improve banks’ ability to withstand sudden liquidity shocks without unnecessarily restricting credit to productive businesses.
The proposed pilot period will be important in identifying institutions that need significant adjustments, assessing the impact of the additional digital-deposit requirement and determining whether Ghana’s financial markets offer enough qualifying liquid assets beyond government securities.
Ultimately, the success of the directive will depend on more than banks reporting an LCR of 100%. Their liquid assets must also be capable of being converted into cash when withdrawals accelerate and several institutions are competing for liquidity at the same time.
