Project Coordinator for Deposit Protection at the Bank of Ghana, Franklin Belnye says the introduction of the Deposit Insurance Scheme will help protect small depositors and increase confidence in the country’s banking system.

According to him, the continuous failure of financial institutions over the years have proved that provisional supervision is not enough to keep deposit-taking institutions in business.

He said the collapse of several banking institutions in the early 90s and the recent collapse of institutions such DKM Microfinance, UT Bank and Capital Bank is a clear indication that other mechanisms need to be put in place to help address such things.

“We have had experience of distress… all these developments indicate to us the we have in place the three pillars of provisional supervision and yet institutions are failing so we need more than just prudential effective oversight,” he noted.

He added that the Deposit Insurance Scheme will among other things help in “managing the quasi-fiscal cost that arise when a deposit-taking institution goes under”.

Mr Belnye was speaking at a business breakfast meeting organised by Graphic Business and Stanbic Bank under the theme “Deposit insurance: Catalyst for a stronger banking industry”.

The Deposit Protection Act which was passed by parliament in 2016 aims at protecting depositors from unforeseen circumstances that may result in loss of funds.

According to the law, depositors whose monies get locked up in financial institutions during crisis may receive up to GH¢6,250 in compensation from the Deposit Protection Fund Corporation.