BoG proposes new liquidity rule to strengthen banking sector resilience

The Bank of Ghana has issued an exposure draft of its proposed Liquidity Coverage Ratio (LCR) Directive, 2026, seeking feedback from industry stakeholders and the public as part of efforts to strengthen liquidity risk management across the banking sector.

The proposed directive is intended to ensure that banks maintain sufficient high-quality liquid assets to withstand a severe 30-day liquidity stress scenario, reducing the risk of liquidity shocks spreading through the financial system and the wider economy.

According to the central bank, the initiative is informed by lessons from the 2007 global financial crisis, during which many financial institutions experienced significant liquidity pressures despite appearing adequately capitalised.

The regulator noted that effective liquidity management remains critical because banks typically transform short-term deposits into longer-term loans, exposing them to liquidity risks.

Under the proposed framework, banks will be required to maintain a Liquidity Coverage Ratio of at least 100 percent, calculated as the ratio of a bank’s stock of unencumbered High-Quality Liquid Assets (HQLA) to its total net cash outflows over a 30-day stress period.

The central bank said the requirement is designed to ensure banks can meet obligations during periods of market and institution-specific stress.

The draft directive categorises eligible liquid assets into Level 1 and Level 2 assets. While Level 1 assets may account for up to 100 percent of a bank’s HQLA stock, Level 2 assets will be limited to a maximum of 40 percent, with Level 2B assets capped at 15 percent.

In addition to setting quantitative liquidity requirements, the framework introduces enhanced reporting and disclosure obligations.

Banks will be required to conduct LCR stress tests at least weekly and submit monthly LCR returns to the central bank.

Institutions whose liquidity coverage ratio falls below, or is expected to fall below, the regulatory minimum threshold of 100 percent must immediately notify the Bank of Ghana and provide details of the causes, corrective measures and expected duration of the shortfall.

The directive also requires banks to disclose LCR information in their annual audited financial statements and quarterly unaudited financial statements using prescribed reporting templates.

The central bank said the directive should be read alongside other regulatory instruments, including the Liquidity Risk Management Directive, 2026 and the Liquidity Monitoring Tools Directive, 2026, to provide a comprehensive framework for liquidity risk oversight.

The proposed directive is scheduled to take effect on September 1, 2027. Banks are expected to align their policies, systems and processes with the new requirements by August 31, 2027.

A one-year pilot phase will precede full implementation, during which banks will submit quarterly reports to the central bank before transitioning to monthly reporting.

The Bank of Ghana has invited comments on the exposure draft from industry participants and the general public, with submissions due by November 30, 2026.