The Finance Ministry has revealed that the pensions industry’s exposure to the banking sector is about GH¢900 million; justifying the need for Parliament to approve a GH¢15.6 billion to protect the financial sector from a possible collapse.
The Finance Minister, Ken Ofori-Atta in a memo to Parliament, argued that the financial sector is very interconnected and for instance troubles from the banking sector could easily spill over to the pensions industry, threatening the future of millions of workers.
According to the National Pensions Regulatory Authority (NPRA), the industry’s total assets under management (AUM) run in excess of GH¢10 billion.
Mr. Ofori-Atta’s memo to Parliament said GH¢11.65 billion of the requested amount would be used to protect depositors of the nine indigenous banks that lost their licenses between 2017 and 2019 over certain regulatory breaches.
They include UT, Capital, Sovereign, Construction, Royal, Beige, Unibank, Premium and Heritage banks.
The rest of the approved funds will be used to sort out depositors in collapsed institutions in other various segments of the financial sector ranging from savings and loans, finance houses to fund management companies.
Financial sector interconnections
A mapping exercise conducted by the Bank of Ghana on exposures between and across financial institutions in the Ghanaian economy shows that as September 2019 total exposures of banks to other financial institutions were approximately GH¢1.54 billion.
The total exposure of banks to the securities industry was approximately GH¢839.4 million. Banks’ total exposure to the insurance industry was approximately GH¢33.4 million. Total exposures of Banks to Specialized Deposit-taking Institutions was approximately GH¢ 669.51 million.
The Insurance industry has placed an amount of GH¢839.3 million with banks. The total exposures of SDIs to the universal banks was approximately GH¢933.6 million.
Total exposure of Savings and Loans institutions to other financial institutions was approximately GH¢637.6 million, and the Savings and Loans industry held approximately GH¢467.73 million of other financial institutions funds.