Deposit insurance will protect your money – BoG Governor

Business News of Tuesday, 6 February 2018



play videoGovernor of the bank of Ghana, Dr Ernest Addison

The Governor of the Bank of Ghana, Dr Ernest Addison says the steady growth in the number of financial institutions makes the development of a system that will guarantee the safety of depositors very critical.

He noted that the increasing complexities of the financial sector in recent times require, more urgently, that an insurance scheme, together with the tightening up of the bank’s supervisory role is, put in place.

“Banks are getting into consolidated arrangements with affiliates in capital markets, insurance firms, those engaged with real estate companies…these are all part of the complications we see in the financial system.

“So we can have the most prudent application of banking rules, have the most effective oversight over the financial sector to anchor stability but then, you also need that deposit insurance scheme to provide the additional safety net to boost confidence in the financial sector especially for small depositors,” he said.

Dr Addison was speaking at the Graphic/Stanbic Business Breakfast Meeting in Accra on Tuesday.

Held on the theme “Deposit insurance, catalyst for a stronger banking sector’, the meeting is expected to afford players in the financial sector the opportunity to deliberate on the merits and demerits of deposit insurance which has been made mandatory following the passage of the Ghana Deposit Protection Act, 2016, Act 931.

It will also provide a medium for the Central Bank to update the country and banking sector on, and provide a better understanding of, the Deposit Protection Scheme.

Dr Addison disagrees with some industry players who believe the scheme is irrelevant.

He said the idea is to have an additional layer of protection in addition to the Central Bank’s oversight.

“That is also a reason why we have had to increase the capital requirement for banks. All things being equal, we expect that with a strong and well-capitalized bank, at least the sector will be well positioned to offer saver services to customers than in a situation in which the banks had weaker capital,” he explained.

Adequate capital is key to ensuring financial stability, he said, adding “So not only are we looking at the issue of deposit insurance, we are also emphasizing the importance of banks having adequate capital.”

On the issue of ownership of banks, Dr Addison corrected the notion that there are more foreign banks than local ones in the country.

He said the data available to the Central Bank does not suggest a dominance of foreign banks.

“In fact, if you look at the numbers in terms of banks that are domestically controlled and those that are foreign controlled, I think the numbers are just balanced,” he stressed.

Ghana beyond aid

Dr Addison said in order to achieve Ghana beyond aid, the banking sector needs to position itself properly to assist the government.

He said a Ghana that is economically diversified will require a strong financial sector to assist in the structural transformation and finance private sector-led activities.

To achieve this, the Governor noted that the financial sector will require bigger capitalized Ghanaian-owned banks, shifting away from small, family-managed banks with governance challenges.

“We will need well capitalized domestically owned banks that have effective board oversight with very high corporate governance standards. These are the ingredients for stability and sustainability of the banking sector.”

In 2018, the BoG according to the Governor, intends to continue to tighten the regulatory standards and ensure that the regulated institutions have adequate levels of capital.

The Central bank will also ensure compliance with the minimum capital requirements and address the specific risks from the high non-performing loans, poor corporate governance and weak risk management systems.

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