Ratings agency Fitch has said the majority of Ghanaian banks are expected to remain capital-compliant when regulatory forbearance on the treatment of losses from the Domestic Debt Exchange Programme (DDEP) expires at the end of 2025.

The agency attributed the positive outlook to strong profitability, muted risk-weighted asset growth, 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’ capitalisation, given their high exposure to sovereign fixed-income securities,” Fitch noted.

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In response, the Bank of Ghana scrapped the 3% capital conservation buffer, reducing the minimum capital adequacy ratio (CAR) to 10% from 13%. It also permitted banks to phase in losses from cedi-denominated government bonds into their regulatory capital evenly over four years, beginning at the end of 2022.

Fitch highlighted that this regulatory relief has allowed most banks to stay capital-compliant and has supported confidence in the financial system. No similar forbearance was extended to losses on other restructured instruments, including Eurobonds, due to banks’ limited exposure.

The ratings agency also observed a marked recovery in the sector’s capitalisation since the DDEP. It estimates that the banking sector’s tangible common equity to tangible assets ratio improved to 10.3% in Q1 2025, up from 7.4% at the end of 2022.

This recovery, it explained, has been underpinned by high interest rates, which drove strong profitability through higher treasury bill yields excluded from the DDEP.

It was further aided by weak credit growth and a more than 40% appreciation of the cedi against the US dollar since the end of 2024, which reduced the size of foreign-currency assets in cedi terms and boosted solvency metrics.

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