According to the Central Bank, the stress test indicated that most banks would survive daily deposit withdrawals of 1.0% to 4.0% over 30 days if the GoG bonds market was liquid.

However, most banks would not survive a run of more than 1.0% of daily deposit withdrawals for 30 days if the GoG bond market is illiquid.

Interest Rate Risk

The banking sector appears robust against interest rate risk.

The results of a stress test showed that a 16.0 percentage point increase in interest rates persisting over the next year may lead to a decline in the Capital Adequacy Ratio (CAR) from a post-Eurobond restructuring level of 13.85% to 11.57%.

The report stated that an extreme decline in interest rates may improve the solvency conditions in the banking sector, given that more liabilities would reprice over the one-year horizon compared to assets. Accordingly, a steady decline in interest rates is expected to improve the solvency conditions in the banking industry.

Exchange Rate Risk

The Bank of Ghana noted that exchange rate fluctuations have a minimal impact on solvency conditions in the banking sector.

The test results indicate that an unexpectedly large movement of the Ghana cedi against the US dollar may have minimal direct impact on the solvency of banks, reflecting the existing limits on the Net Open Position (NOP) within the banking industry.

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According to the Bank of Ghana, despite improvements in the banking sector’s performance, elevated credit risk poses a threat to the sector’s recovery process.

However, it believes, the consistent rebound in profits, adherence to recapitalisation plans, and enforcement of strict credit underwriting standards will however help ensure that banks remain on the path to full recovery and resilience.

It stated in its Monetary Policy release that the banking sector performance in the first half of the year points to continued recovery from the impact of the Domestic Debt Exchange Programme.

Total banking sector assets grew by 33.3% to GH¢323.1 billion at end-June 2024, relative to 21.2% growth at end-June 2023.

Profitability, liquidity, and efficiency indicators also improved over the period.

The Capital Adequacy Ratio (CAR) adjusted for reliefs remained unchanged at 14.3%, between June 2023 and June 2024.

Without reliefs, the Central Bank said the CAR was reported at 10.6%  in June 2024, higher than the 7.4% recorded in June 2023.

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