Ghana Deposit Protection Scheme to commence in December

Accra Mr Ken Ofori-Atta, Financial Minister has said the completion of reform exercise within the Banks and specialized deposit-taking institutions (SDIs) in August has paved way for commencement of the “Ghana Deposit Protection Scheme” in December, 2019.

That, he said, would protect the national budget from costs arising from banking sector failure.

He said the scheme, supplemented by effective regulation and supervision by the Bank of Ghana, and the work of the Financial Stability Council, would go a long way to make the financial system more resilient and supportive of the efforts to foster inclusive socio-economic growth.

Mr Ofori-Atta said this when he presented the Budget Statement and Economic Policies of Government for 2020 to Parliament on Wednesday in Accra.

He noted that Banks’ profitability had also been greatly enhanced with a significant pick-up in profit after tax in 2019 compared to the previous year and prior to the reforms, the SDI sector was plagued with acute liquidity and insolvency challenges.

He said their continued existence posed severe risks to the stability of the financial system and to depositors and as a result, in two separate clean up exercises the licenses of these insolvent institutions were revoked to curtail a spillover of these weaknesses to other sectors of the financial industry.

The Minister said these insolvent SDIs comprised of 23 savings and loans and finance house companies, and 347 microfinance companies and Non-Bank Financial Institutions comprising of 39 micro credit companies, one dormant leasing company and one dormant remittance company were also resolved in May and August respectively.

This will safeguard the financial system against potential contagion and weaknesses in the SDI sector which threatened to erode the gains made in the banking sector, he said.

Credit risk management practices and loan recovery efforts will be stepped up to minimize overall risks in the banking sector.

Mr Ofori-Atta, therefore, assured that the central bank would continue to pursue policies and strengthen supervision to ensure that the banking sector remains well-capitalised, solvent, liquid and profitable and to also ensure that significant gains recorded in the aftermath of the reforms.

Source: Ghana News Agency