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The Capital Adequacy Ratio (CAR) of banks fell to 14.2% in October 2022 due to investment losses by some banks as a result of the ‘mark-to-market’ policy and the expansion of the banks weighted assets, on the back of the sharp credit growth.
According to the November 2022 Monetary Policy Report by the Bank of Ghana, the marked decline in the industry’s CAR is reflective of the current macroeconomic developments.
“The industry’s solvency position, measured by the Capital Adequacy Ratio (CAR) was 14.2% in October 2022, higher than the prudential minimum of 13%, but a decline from the 19.8% recorded during the same period last year”.
“The marked decline in the industry’s CAR is reflective of the current macroeconomic developments, particularly the impact of the currency depreciation, the mark-to-market investment losses by some banks, and the expansion of banks’ weighted assets on the back of the sharp credit growth which is weighing down the industry’s CAR”.
For liquidity, the banking industry’s liquidity position remained strong with improvements in the core measures.
The ratio of core liquid assets (mainly cash and due from banks) to total deposits increased to 39.5% in October 2022, from 28.0% in October 2021.
Similarly, the ratio of core liquid assets to total assets increased to 27.2%, from 18.9% over the same comparative period.
Overall, the industry’s Financial Soundness Indicators as of October 2022 remained broadly positive despite the moderation in some indicators.
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