The announcement made by the Governor of the Bank of Ghana, Dr. Johnson Asiama, that the central bank is committed to reviewing the Cash Reserve Ratio (CRR) for commercial banks in a phased manner to prevent economic disruptions, has been welcomed by economists and the Director of Research at the Institue of Economic Affairs (IEA) Dr John Kwakye.
Dr Kwakye described it as a wise decision by the BoG.
In a post on his X page, he said “This is a wise decision. The 3-tier regime is not only cumbersome to implement but it has failed to direct credit to the private sector as intended while also being costly to banks.”
https://t.co/Wll2q6kgX1. This is a wise decision. The 3-tier regime is not only cumbersome to implement but it has failed to direct credit to the private sector as intended while also being costly to banks.
— J. K. Kwakye (@JohnKwabenaKwa1) February 22, 2025
It is recalled that while speaking during a meeting with the Governing Council of the Ghana Association of Banks (GAB), BoG Boss, Dr. Asiama acknowledged the impact of the CRR on commercial banks and assured that any further adjustments would be made cautiously by the Central Bank.
“We recognise the impact of the Cash Reserve Ratio on commercial banks and intend to review it critically. However, this review should be done gradually to avoid unintended economic consequences,” he said during the meeting.
The meeting with the BoG Governor was initiated by GAB members who aimed to foster open dialogue between banks and the central bank on industry challenges, including the impact of the CRR, Ghana’s credit rating issues, and correspondent banking relationships.
The Bank of Ghana had previously increased the CRR from 12% to 14% in March 2023 as part of efforts to mop up excess liquidity in the market. However, commercial banks have since appealed for a downward review, arguing that the policy limits financial intermediation and raises operational costs.
Dr. Asiama acknowledged these concerns and committed to further engagement with stakeholders to assess the implications of a potential adjustment.
