Seth Terkper, former Finance Minister, interacting with Alhassan Andani, CEO of Stanbic Bank (left) and Ransford Tetteh, Editor of Daily Graphic at the breakfast meeting
The Ghana Deposit Protection Corporation (GDPC) is expected to become operational by the end of this year to protect Ghana’s banking industry from shocks in the event of unexpected challenges.
The coming into force of the entity has become necessary in the light of recent developments in Ghana’s banking sector, which saw banks like UT Bank and Capital Bank and DMK Microfinance crumble.
Deposit insurance forms part of a pool of financial safety net mechanisms that is used in the financial system by government to protect and strengthen the financial system.
Governor of the Bank of Ghana, Dr Ernest Addison, speaking yesterday at a business breakfast meeting organised by Graphic Business, in collaboration with Stanbic Bank, said the solid growth in the number of financial institutions made the development of a system that will guarantee the safety of depositors very critical. The programme was themed: “Deposit insurance – a catalyst for a stronger banking sector’.
According to him, the increasing complexities of the financial sector in recent times required an insurance scheme, as well as the tightening of the bank’s supervisory role.
“Banks are getting into consolidated arrangements with affiliates in capital markets, insurance firms, those engaged with real estate companies…these are all part of the complications we see in the financial system.
“So we can have the most prudent application of banking rules, have the most effective oversight over the financial sector to anchor stability but then, you also need that deposit insurance scheme to provide the additional safety net to boost confidence in the financial sector, especially for small depositors,” he said.
The actualization of deposit insurance has become mandatory as a result of the passage of the Ghana Deposit Protection Act, 2016, Act 931.
It is also expected to provide a medium for the Central Bank to update the country and banking sector on and further provide a better understanding of the Deposit Protection Scheme.
Meanwhile, critics have indicated that coverage of the scheme ought to be clearly defined, adding that the scheme should be granted independence from external interference, particularly government.
By Samuel Boadi