Dr Mahamudu Bawumia
VICE PRESIDENT Dr Mahamudu Bawumia has expressed confidence in the ability of the newly established Ghana Deposit Protection Corporation (GDPC) to safeguard the savings and investments of Ghanaians.
Speaking at the official launch of the GDPC and the International Association of Deposit Insurers (IADI) Africa Regional Committee (ARC) technical assistance workshop in Accra, yesterday, the Vice President noted that there was ample evidence from across the globe that the presence of strong safety nets was crucial to restoring and maintaining public confidence in the financial system.
Apart from that he said deposit insurance systems could play an essential role in protecting banks’ customers and reducing vulnerabilities of the financial sector and that “deposit insurance can enhance stability of the financial system by preventing bank runs and supporting the stability and smooth operation of the economy.”
The GDPC was formed following the recent crisis that bedeviled the country’s financial sector which left in its wake the virtual collapse of 11 banks, 347 microfinance institutions and 43 fund managers.
With the inauguration of the GDPC Board of Directors and the corporation’s member financial institutions paying their initial premiums to the scheme, Dr Bawumia has assured of government’s continuous support in ensuring that it grows to become an important safety net in Ghana’s financial sector.
He was also confident that members of the IADI would help to steer the corporation in the right direction of international best practice.
In view of the fact that the GDPC would be operating in a largely reformed financial sector, the Vice President stressed the need for them to ensure the necessary public education about the scheme, its operations and benefits to every depositor, insisting “such an education is an invaluable public good and we must get on with it soon as possible.”
With this relatively new deposit insurance scheme, in addition to the sound prudential regulation by the Bank of Ghana (BoG), he stressed the need for the GDPC to ensure that the Ghanaian financial sector was set on a good path to financial stability.
Governor of the BoG, Dr Ernest Addison indicated that the absence of a deposit insurance scheme in the midst of bank failures could impose enormous strain on fiscal policy management.
“In the absence of an effective scheme, as has been the case in Ghana until now, the failure of banks and specialized deposit-taking institutions would suddenly place an enormous burden on tax payers, as the government would be compelled to finance pay-outs to depositors in an attempt to forestall the potential for a bank-run and help contain threats to financial stability,” he noted.
By Charles Takyi-Boadu, Presidential Correspondent