Deposit insurance is a catalyst for financial stability in Ghana – Veep

By Godwill Arthur-Mensah, GNA

Accra, Nov. 18, GNA – Vice President Dr
Mahamudu Bawumia Monday launched the Ghana Deposit Protection Corporation
(GDPC) to support the development of a safe, sound and stable market-based
financial system.

The establishment of the Corporation, he
said, is an important step towards boosting the confidence of the Ghanaian
depositors as part of efforts to consolidate the gains in the financial sector
reforms undertaken by the Bank of Ghana (BoG) over the last two years.

The move, he said, was imperative in view of
the 2008 global financial crisis that affected many economies worldwide, with
its huge financial and social costs on depositors.

Therefore, he said, taking measures to
protect the deposits of bank customers, either through the establishment of
deposits insurance schemes or enhancing already existing schemes was critical
for all stakeholders in the financial sector to promote financial stability.

Ghana established the Ghana Deposit
Protection Scheme and enacted the Deposit Protection Act (Act 931) as the legal
framework for protecting depositors’ funds. 

Vice President Bawumia said this when he
launched the GDPC at the 2019 International Association of Deposit Insurers
(IADI) Africa Regional Committee Technical Assistance Workshop in Accra.

The event, organised by the GDPC and the
Central Bank, was held under the theme: “Deposit Protection: A Catalyst for
Financial Stability”.

It attracted deposit insurers, financial
analysts, policy makers and the Diplomatic Community, to share ideas and
network, in order to protect depositors from losing all their investments in
the event of a Bank failure.

A seven-member Governing Board of the GDPC
was introduced at the event and they would have an oversight responsibility
over its management.

“Creating an enabling and stable financial
environment is a pre-requisite for sustained economic growth. I am particularly
grateful for the timing and opportunity given to Ghana to host the Regional
Committee Technical Assistance Workshop,” Dr Bawumia said.

The Vice President made reference to the
country’s own financial meltdown in recent years that resulted in the shutdown
of 11 Universal Banks, 347 micro-financial institutions and 43 Fund Management
Institutions by the BoG and the Securities and Exchange Commission.

He said government would continue to support
the GDPC to grow to become an important safety net in the country’s financial
sector and entreated the Corporation to undertake intensive public education on
its operations.

Dr Ernest Gyedu Addison, the Governor of the
Central Bank, for his part, said the Bank, being a statutory institution, with
the responsibility of formulating and implementing monetary policy, would continue
with its mandate to ensure price stability, guarantee financial stability and
promote economic growth.

The Central Bank, he said, would take keen
interest in matters bordering on deposit insurance because it recognised the
importance a deposit protection scheme could contribute towards the stability
of the entire macroeconomic architecture of the country.

“This explains why the Central Banks are
entrusted with the authority to regulate banks and specialized deposit-taking
institutions in order to protect public savings, prevent build-ups of toxic
assets which could have detrimental effects on the economy, prevent adverse
consequences of bank failures with the ultimate goal of ensuring a health
financial system,” Dr Addison added.