The Bank of Ghana has revealed that liquidity risk remains well-contained in the banking industry, provided the Government of Ghana (GoG) bonds are liquid.

According to the Central Bank, the stress test revealed that most banks would survive daily deposit withdrawals of 1.0% to 4.0% or 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, in case the GOG bond market is illiquid.

Interest Rates Risk

The banking sector appears robust to interest rate risk.

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

The extreme decline in interest rates, the report said, 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 said the exchange rate fluctuations have minimal impact on solvency conditions in the banking sector.

The test result indicates 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 NOP within the banking industry.