Opinion & Analysis

Ghana’s interbank forex market: A summary of the rules


On 29th June, 2023, the Bank of Ghana (BoG) announced the suspension of Fidelity Bank and First National Bank from Forex Trading for 30 days.

This article aims to present a landscape of interbank markets in Ghana, the policy implications for financial regulators and also highlight the rules governing the interbank forex market.

In a journal by the International Monetary fund issued in 1994, it stated that in developed countries, billions of dollars change hands daily in the interbank markets for foreign exchange. These markets are the deepest, most liquid, and most resilient of all global currency markets. But, only in recent years have interbank foreign exchange markets begun to emerge in developing countries, in many cases spurred by the need to reform exchange rate systems. Since the mid-1980s, for example, a number of African countries have moved to floating exchange rate systems, often through interbank market arrangements.


The Ghana interbank forex market was established in 2006 by the BoG, as part of its efforts to modernize the country’s financial system and promote economic growth. The interbank forex market was created to provide a platform for banks and other financial institutions to trade currencies with each other, in order to facilitate cross-border trade and investment.

The interbank forex market is regulated by the BoG, which sets the rules and regulation governing the market and monitors market activity to ensure compliance with these rules. Over the years, the Ghana interbank forex market has grown in size and sophistication, with more banks and financial institutions participating in the market, and the introduction of the new trading platforms and technologies to facilitate trading. Today, the Ghana interbank forex market is an important part of the country’s financial economic growth and development.

How interbank forex market works

Section 3.1 of the Ghana Interbank Forex Market Conduct, addresses how a bank can obtain a license to become a member of the interbank FX market.

It provides that:

“a bank can only become a Licensed foreign exchange dealer (LFXD) and a member of the interbank FX market if granted a license by Bank of Ghana under section 3 of the Foreign Exchange Act, 2006 (Act 723)”.

It is ideal to highlight the difference between interbank market and interbank forex market. The interbank market is a network of banks that trade currencies with each other, while the interbank forex market is a subset of the interbank market that deals specifically with the trading of foreign currencies.

So, the interbank forex market is a part of the broader interbank market. The Interbank forex market conducts business through electronic trading platforms, such as EBS and Reuters, where banks can buy and sell currencies in real time. The trading is done electronically, and the prices are set by the market. Banks can also trade currencies over the phone or through brokers.

The interbank market is decentralized, which means there is no central exchange where all the trading takes place. Instead, banks trade with each other directly or through brokers. The rate in the interbank forex market is determined largely by the supply and demand of currencies. Banks buy and sell currencies with each other based on the prevailing market rates. These rates are influenced by a variety of factors, such as economic indicators, political events and market sentiment.

The rates are also affected by the actions of BoG which can influence the supply and demand of currencies by adjusting interest rates or implementing monetary policies. The interbank forex market is a decentralized market, so there is no single exchange where all the trading takes place. The interbank forex market is open from 9:00 to 16:00 hours Greenwich Mean Time (GMT) on all business days. The BOG is exempt from this and may trade with a Licensed Foreign Exchange Dealers (LFXD) outside the regular market hours stated.

Institutional and regulatory framework

Ghana’s interbank forex market is regulated by several laws and regulations including the Foreign Exchange Act, 2006 (Act 723), the Bank of Ghana Act, 2002 (Act 612), the Anti- Money Laundering Act, 2020 Act (1044) and the Banks and Specialized Deposit- Taking Institutions Act, 2016, (Act 930). The Foreign Exchange Act, 2006 provides the legal framework for the regulation of foreign exchange transactions in Ghana, and sets out the rules and regulations governing the interbank forex market.

It will be recalled that on June 29th 2023, the Bank of Ghana imposed a combined penalty of 1000 penalty units against Fidelity Bank and First National Bank Ghana Limited due to the banks breach of Section 3.4 of the guidelines which specifically address Indicative Quotes, which mandate Licensed Foreign Exchange Dealers (LFXDs) operating in the interbank forex market (excluding the BoG) to regularly update their indicative quotes for buying and selling US dollars on the Reuters and Bloomberg information systems. These updates must occur at intervals of no more than 30 minutes. This requirement is vital for maintaining transparency and enabling market participants to make well-informed decisions.

“LFXDs are required to update indicative quotes for buying and selling US dollars at regular intervals, on the Reuters and Bloomberg information systems. Indicative quotes shall be updated at intervals of no more than 30 minutes. (This will show the price at which a market-maker is prepared to buy and sell at the minimum traded lots),”

Furthermore, section 3.5 – which concerns Trade Reporting on Platforms, mandates all interbank FX trades to be booked on the Reuters platform and confirmed within five minutes after conclusion of the trade. Additionally, these trades must be reported in the daily FX report submitted to the apex bank. This requirement ensures accurate record-keeping and enhances market oversight. The said section provides thus:

“All interbank FX trades must be booked on the Reuters platform and appropriately confirmed within five minutes after the trade is concluded. These trades must also be reported in the daily FX report submitted to the Bank of Ghana.”

Lastly, section 3.9 – which concerns the Fixing of the Official Exchange Rate, outlines the procedure for calculating the Ghana cedi reference rate in relation to the US dollar. The regulator is responsible for publishing this reference rate on its website daily at 16:30 hours Greenwich Mean Time (GMT), excluding holidays. The rate is calculated using the weighted average exchange rate of all eligible US dollar transactions reported to the regulator before the cut-off time of 15:30 hours GMT. The Bid and Offer reference rates are determined by applying a bid/ask spread of plus or minus 0.05 percent around the weighted average exchange rate. Additionally, the reference rate is also published on Reuters and Bloomberg by 16:30 hours GMT.

The BOG further temporarily suspended the forex licenses of both banks. The suspension took effect from June 29, 2023, until July 28, 2023. All these are in line with ensuring compliance by dealers in the industry with the rules.

Any legal remedy?

 The legal remedies available to these two banks should they intend to challenge the decision of BOG would be to sue the BOG to set aside the decision.

Is There Any Regulation?

The Bank of Ghana Act, 2002 establishes the Bank of Ghana as the central bank of Ghana, and gives it the responsibility for regulating the financial systems, including the interbank forex market.

The Anti- Money Laundering Act, 2020 Act (1044) sets out the rules and regulations for preventing money laundering and terrorist financing activities in Ghana and requires financial institutions, including those participating in the interbank forex market, to comply with these rules and regulations. Other laws and regulations that may apply to the interbank forex market include the Companies Act, 2019 (Act 992) the Securities Industry Act 2016, (Act 929) and the income Tax act, 2015 (Act 896) among others.

There is a need for regulation in the interbank forex markets. The lack of regulation can lead to market manipulation, insider trading and other unethical practices that can harm investors and destabilize the financial system. Regulation aids to ensure that the market operates fairly and transparently, and that investors are protected from fraud and abuse. Many countries have regulatory bodies that oversee the interbank forex markets such as the Commodity futures trading commission (CFTC) in the United States and the Financial Conduct Authority (FCA) in the United Kingdom.

The BoG is responsible for maintaining financial stability and ensuring that the economy is functioning properly. One of the ways it does this is by regulating the interbank forex market to prevent excessive volatility or market manipulation. The BoG may also participate in the market by buying or selling currencies to influence their value or by setting interest rates under section 3.9 of the Ghana Interbank Forex Market Conduct rules. The BoG also constantly implements monetary policies that affect the supply and demand of currencies.

Market concentration and size

In order for an interbank forex market to operate competitively, there’s the need to have a sufficient number of commercial banks and foreign exchange dealers. It is important to remark that, the larger the market the more liquidity it has, which means that there are more buyers and sellers in the market and it is easier to buy and sell currencies at a fair price.

Assessing interbank markets

An efficient, well-functioning interbank market arrangement can typically be assessed by:

• the market’s ability to reduce segmentation and, consequently, to reduce exchange rate differentials;

• the increased allocation of foreign exchange through the official market and a market exchange rate that reflects demand and supply conditions as closely as possible;

• the ability of market participants to collect, analyze, and transmit information at the lowest possible cost, as well as to minimize transaction costs; and

• the central bank’s ability to monitor the market through effective information gathering, market intervention, and regulations.

In general, it is fair to say that Ghana has made some progress in the areas of liquidity, volatility and transparency. Liquidity refers to the ease with which currencies can be bought and sold in the market, while volatility refers to the degree to which currency prices fluctuate over time. Transparency refers to the degree to which market participants have access to information about the market, such as price quotes and trading volumes. The interbank forex market is also assessed based on the quality of its infrastructure, such as trading platforms and settlement systems, as well as the regulatory environment in which it operates.

Are there challenges to the forex market?

Ghana’s interbank forex market faces several major constraints, such as counterparty credit risk, liquidity risk and regulatory risk. These identified risks will be discussed as follows:

  1. Counter party risk refers to the risk that one party to a transaction may default on its obligation to the other party, such as by failing to deliver the agreed upon currency. This risk can be mitigated through the use of collateral or credit default swaps, but it can pose a significant challenge to market participants.
  • Liquidity risk refers to the risk that there may not be enough buyers or sellers in the market to facilitate trade at a given price. This risk can be exacerbated during times of market stress or uncertainty, such as during a financial crisis as was experienced during the early embers of the Russia-Ukraine war.
  • Regulatory risk refers to the risk that changes in regulations or regulatory policies may affect the market, such as by limiting the types of transactions that can be conducted or imposing new reporting requirements. Other constraints to the interbank forex market include the complexity of the market, the need for sophisticated trading tools and platforms, and the potential for market manipulation.


A well-functioning financial sector can be a driver of economic development; in my respectful opinion, more needs to be done to improve the operations of the forex market. BOG has to be more active (without necessarily being interventionist) in educating participants about the market’s operations, alternative approaches to managing foreign exchange resources and open positions, and the need to turn to other dealers, instead of to the central bank, to reduce open positions. This is because the interbank forex market is a highly complex and fast-moving market and it requires access to sophisticated trading platforms and tools, as well as the ability to analyze and interpret market data in real-time.

For this reason section 2.1 of Ghana interbank Forex Market Conduct states that “it is imperative that market participants have a high level of awareness and understanding of the market practices. Management of LFXDs is required to subject their staff to the highest test of knowledge and continuously provide avenues for knowledge updates.”

The BOG can improve their own effectiveness in the market, by continuously developing their capacity to monitor, intervene, and provide sound guidance through regulation and dialogue. It is admitted that the exchange market is still new, and participants are “learning by doing.” Despite the existence of distortions in the interbank foreign exchange markets, Ghana’s interbank forex market has taken a positive step forward to ensure that exchange rates are more flexible and responsive to the forces of supply and demand.


IMF article on Interbank Foreign Exchange Markets in Africa by Yin – Funlum and Calvin Mcdonald, 1994.






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