A preliminary assessment of the impact of the Domestic Debt Exchange Programme (DDEP) on the banking sector indicates significant losses on account of impairment of banks’ holdings in Government of Ghana bonds.

The assessment is based on December 2022 data.

According to the Central Bank, the impact of the DDEP as currently assessed is moderated by the timely introduction of regulatory reliefs by the Bank of Ghana to support the banking sector, similar to the reliefs provided to banks at the onset of the Covid-19 pandemic.

As a result, it said the industry is still fairly resilient.

“Our preliminary assessment will be updated once banks’ external auditors complete their audits of banks’ 2022 financial performance making the necessary adjustments to fully reflect the DDEP impact”, the Central Bank stated.

It further added that banks are expected to publish their 2022 audited financial statements by end of April 2023 following a one-month dispensation granted by the Bank of Ghana on the account of the DDEP.

Meanwhile, key financial soundness indicators remained broadly sound, supported largely by the regulatory reliefs provided by the Bank of Ghana.

Among others, the minimum Capital Adequacy Ratio (CAR) required to be maintained by banks was reduced from 13% to 10% as of December 31, 2022, and losses from the DDEP are to be reflected in the computation of CAR over a period of up to three years.

Accordingly, the industry’s average CAR adjusted for the regulatory reliefs was 15.7% in December 2022, compared with the CAR of 16.6% as of December 2022 without the DDEP.

Meanwhile, the Bank of Ghana increased its policy rate to 29.5% by 150 basis points.

This means loans will remain expensive going forward.