Fitch Ratings says Ghana’s banking sector is on course to remain largely capital-compliant when regulatory forbearance linked to the government’s Domestic Debt Exchange Programme (DDEP) expires at the end of 2025.
The ratings agency attributed the sector’s resilience to strong earnings, muted growth in risk-weighted assets, and in some cases fresh capital injections.
“Ghana’s Domestic Debt Exchange Programme (DDEP), which was launched in December 2022 and concluded in 2023, imposed large losses on the banking sector and had a significant impact on banks’ capitalization, given their high exposure to sovereign fixed-income securities,” Fitch noted.
The DDEP, which swapped existing bonds for lower-yielding instruments, eroded banks’ balance sheets and forced regulators to act. The Bank of Ghana (BoG) responded by slashing the capital adequacy ratio (CAR) requirement from 13% to 10% through the removal of the 3% capital conservation buffer. It also allowed banks to phase in DDEP-related losses from cedi-denominated bonds evenly over four years, beginning in 2022.
Fitch observed that this forbearance has “allowed most banks to stay capital-compliant and has supported confidence in the financial system.” Losses tied to Eurobonds and other restructured instruments were excluded from the relief, but exposure there was limited.
Since then, the sector has staged a notable recovery. Fitch estimates the banking industry’s tangible common equity-to-tangible assets ratio climbed to 10.3% in Q1 2025, up sharply from 7.4% at end-2022. The rebound has been buoyed by high interest rates, which pushed up treasury bill yields securities not included in the DDEP feeding profitability.
Banks also benefited from slower credit growth and a remarkable currency turnaround. The cedi has appreciated by more than 40% against the US dollar since late 2024, reducing the local-currency value of foreign assets and strengthening solvency ratios.
With profitability cushioning capital positions and macroeconomic conditions improving, Fitch believes most banks are well placed to weather the expiry of regulatory relief at end-2025. Still, the agency cautioned that the durability of the sector’s recovery will hinge on sustained fiscal stability and credit market discipline.
