Ghana’s Deposit Protection Corp to boost confidence in banking, financial sectors – Bawumia

Ghana's Deposit Protection Corporation is now operational, with the system going live on September 30th, 2019.

This was disclosed by the Vice President of the Republic, Dr Mahamudu Bawumia, when he formally launched the take-off of the 2019 International Association of Deposit Insurers (IADI) Africa Regional Committee Conference, being held in Accra.

Speaking on Monday, November 18, 2019, Vice President Bawumia said the inauguration of the board of the Ghana Deposit Protection Corporation was the culmination of years of work, and an important step in boosting the confidence of depositors, who would be assured of getting some of their investments back in the case of the failure of a deposit taking financial institution.

“Deposit insurance can enhance stability of the financial system by preventing bank runs, and support the stability and smooth operation of the economy. There is ample evidence from across the globe that the presence of strong safety nets is key to restoring and maintaining public confidence in the financial system. And there is ample evidence globally that deposit insurance systems can play an essential role in protecting banks’ customers and reducing vulnerabilities of the financial sector.

“The establishment of the Ghana Deposit Protection Corporation has been an important step to boosting the confidence of the Ghanaian depositor. And it is part of the efforts to locking-in the gains of financial sector reforms carried out over the last two years. Creating an enabling and stable financial environment is a prerequisite for sustained economic growth,” the Vice President noted.

Commenting on the theme of the workshop, “Deposit Protection - A Catalyst for Financial Stability,” Vice President Bawumia recalled the huge economic and social costs suffered by many economies across the globe due to the 2008 global financial crises. The banking industry was not spared because both depositors’ and investors’ funds were adversely affected. And taxpayers took the brunt of the fiscal costs of the meltdown.

These events heightened the global interest in protecting the deposits of bank customers, either through the establishment of deposits insurance schemes or enhancing already existing schemes

“Ghana has had its own recent financial distresses. Our government came into office in January 2017 and inherited, much to our dismay, a financial system that was under considerable distress.”

The Bank of Ghana has since taken a number of bold steps to undertake a number of reforms, reducing the 34 banks with mixed fortunes to 23 healthy banks re-capitalised and more resilient to shocks.

Vice President Bawumia urged officials of the Ghana Deposit Protection Corporation to be innovative and ensure that the Scheme is operated in a manner that is consistent with protecting depositors’ funds.

“The Corporation is assured of the government’s continued support in ensuring that it grows to become an important safety net in the Ghanaian financial sector. I am positive that its membership of IADI will also help to steer the Corporation in the right direction of international best practice.

“Operating in a largely reformed financial sector, the Corporation needs to ensure the necessary public education about the Scheme, its operations and benefits to every depositor. Such an education is an invaluable public good and we must get on with it soon as possible.”

“The general public”, Vice President Bawumia continued, “must gain the confidence that even in the event of a failure of a financial institution the funds of depositors are secure. This new deposit insurance scheme, in addition to the sound prudential regulation by the Bank of Ghana, should ensure that the Ghanaian financial sector is set on a good path to financial stability.”