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SDI sector clean-up was necessary – Bank of Ghana

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Wed, 14 Oct 2020 Source: www.ghanaweb.com

Second Deputy Governor of the Bank of Ghana has declared the clean-up exercise undertaken by the central bank on Special Deposit Taking Deposit Institutions (SDI’s) had become necessary in 2018.

According to Mrs Elsie Addo Awadzi, most of the defunct SDI’s failed to address unsafe and unsound practices as well as their solvency and liquidity challenges.

Speaking at a media sensitisation in Accra on October 13, 2020, the Second Deputy Governor of the Bank of Ghana said, “It was important to protect depositors of these institutions whose deposits had been locked up for months and years, and the general public that continued to do business with these institutions without knowing their true financial condition”

“The safety of the financial system was at stake, as confidence in the entire system was being eroded. The public simply did not know the difference between an SDI that was distressed and one that was not,” she explained.

Mrs Elsie Addo Awadzi added once the public began to see signs of certain SDIs being unable to honour their obligations to their customers, they started to demand a return of their deposits from other financial institutions, leading to challenges for those institutions that were otherwise strong.

The Second Deputy Governor noted the operationalization of the Ghana Deposit Protection Scheme in October 2019 will go towards protecting small depositors of SDIs in the event that they fail.

Following the cleanup of the SDI sector, there are currently 25 Savings and Loans Companies, 15 Finance Houses/Leasing Companies, 137 Micro Finance companies, and 144 Rural and Community Banks, currently operating in the country.

In order to mitigate the risk of reoccurrence of mass failures in the SDI sector, the Bank of Ghana has revamped its supervision of the sector and working on new rules on corporate governance and risk management to guide operators in the sector.

Source: www.ghanaweb.com

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