Our views on the implications of the new currency-matched dynamic CRR

• CRR shift will soak up USD 1.9bn of FX liquidity from the interbank market. We anticipate a moderate drain in interbank FX liquidity into cash reserves at the Central Bank over the next one week as banks adjust their cash balances in compliance with the regulatory change. Using the MPC’s banking industry data as of April 2025, we expect about USD 1.9bn to be drained by the re-introduced currency-matched dynamic CRR system.
• Gross International Reserves will get a boost from the CRR reform: Under the outgoing CRR system, foreign currency deposits led to higher Cedi reserves being held by commercial banks at the Bank of Ghana. With the new currency-matched dynamic CRR system, banks will now hold foreign currency reserves at the Bank of Ghana for every foreign currency deposit mobilised. We expect this CRR adjustment to increase the Gross International Reserves (GIR) at the Bank of Ghana while reducing commercial banks’ Cedi holdings with the Central Bank. The higher GIR, which stood at 4.7 months of import cover as of April 2025, will strengthen the positive signaling to the market and likely sustain investor confidence in the Cedi exchange rate.
• The BOG will balance increased Cedi liquidity with tight Open Market Operations: Our estimates suggest that the policy tweak will release about GHS 20.5bn into the interbank market in exchange for the foreign currency liquidity drain. However, we do not expect the increased Cedi liquidity to trigger depreciation pressure on the Ghanaian Cedi as any excess Cedi liquidity will be mopped up by the Central Bank to neutralize the liquidity effect. We believe the Bank of Ghana will continue its ongoing aggressive mop-up of excess Cedi liquidity using the weekly auction of Open Market Operation (OMO) securities at the attractive yield of 28.0%. As of 26 May 2025, commercial banks held GHS 60.6bn of excess Cedi liquidity in OMO securities, representing 4.3% of GDP (vs 1.9% at FY2024), underscoring the tightened monetary stance.
• CRR shift will create funding relief for Ecobank and SCB but neutral for GCB Bank (our top picks for listed banks): Prior to the latest CRR adjustment, the high cost of maintaining FX deposits prompted cut backs on FX deposit mobilisation by banks. Our engagements with selected banks’ management in May 2025 revealed that several banks had already reduced their appetite for FX deposits due to the cost of holding Cedi reserves. In our view, the prevailing low drive for FX deposit mobilization will partly mute the impact of the policy tweak. We expect banks, such as Ecobank Ghana and Standard Chartered Bank, with high foreign currency deposits to benefit from lower funding costs which will result from the currency-matched CRR. However, we expect the CRR tweak to have minimal impact on banks with relatively low foreign currency deposits, such as GCB bank.