BoG Tightens Foreign Currency Exposure Limits for Banks

The Bank of Ghana (BoG) has revised its directive on Net Open Position (NOP) limits, introducing stricter controls on the foreign currency exposures of banks in a move widely seen as part of efforts to strengthen risk management and stabilise the foreign exchange market.

The updated directive bars banks from holding long positions in the pound sterling, euro and other foreign currencies. Under the new framework, Authorised Dealer Banks are required to ensure that, at the close of business on any given day, their single currency position is either fully squared (0 per cent) or a short position not exceeding 10 per cent of Net Own Funds (NOF) for each currency.

Specifically, the central bank stated that the Single Currency Position limit for each currency shall range from 0 per cent to minus 10 per cent of NOF. This effectively means banks can no longer take net long bets on individual foreign currencies and must operate within a conservative short position threshold.

The directive also tightens internal reconciliation requirements. Daily changes in the NOP — excluding contingent liabilities — are to be fully reconciled with the net foreign exchange (FX) trade for the reporting day. The net FX trade is to be calculated as total foreign exchange purchases less total foreign exchange sales. This measure is intended to ensure transparency and consistency between reported positions and actual trading activity.

In reinforcing supervisory oversight, the BoG maintained the requirement for continuous reporting. All banks are to continue submitting the Daily Bank Returns (DBK), with reports for each working day to be filed no later than 10:00 a.m. on the following business day. The central bank emphasised that adherence to reporting timelines remains a critical component of its regulatory monitoring framework.

The revised directive further provides clarity on how certain foreign currency transactions are to be treated in the computation of NOP. Where a bank enters into transactions involving partial margins denominated in foreign currency and such margins are in the same currency as the underlying Letter of Credit or contingent exposure, only the net exposure is to be recognised. The net exposure is defined as the difference between the face value of the Letter of Credit and the foreign currency margin.

This provision is expected to prevent the overstatement of exposure levels and ensure that banks’ reported positions reflect their actual risk after accounting for margins held.

The BoG concluded by reminding banks of their obligation to ensure that all submitted reports are complete, accurate and filed within the prescribed timelines, warning that non-compliance will attract sanctions under existing banking laws.

“Any inaccurate, incomplete, delayed submissions and/or non-submission of reports shall attract sanctions as provided in Section 93 (3) and Section 41 (4) of Act 930 as well as any other applicable laws and regulations”.

The revised NOP limits form part of the central bank’s broader prudential measures aimed at safeguarding financial system stability and limiting excessive currency speculation within the banking sector. Analysts say the move is likely to influence banks’ treasury operations and foreign currency trading strategies in the coming weeks, particularly in an environment where exchange rate volatility remains a key concern for businesses and policymakers alike.