The Governor of the Bank of Ghana Dr. Ernest Addison has emphasized the need for the country to adopt deposit insurance schemes to curtail potential effects of bank failures on state resources, enhance public confidence in the financial system, as well as maintain financial stability and economic growth.

“As a matter of urgency and to ensure that in future, cost of resolution of banks do not spill over into the space of fiscal management and create macroeconomic imbalances, the Bank of Ghana recognizes how important a deposit protection scheme can immensely contribute to the stability of the entire macroeconomic architecture, including on financial stability.

Ghana does not wish to be left behind in this global drive to develop deposit insurance schemes to maintain financial stability and economic growth. Ghana’s Deposit Insurance scheme is long overdue,” he said.

The governor made these remarks in his address at the 2019 International Association of Deposit Insurers (IADI) Africa Regional Committee Technical Assistance Workshop in Accra.

The IADI, in collaboration with the Ghana Deposit Protection Corporation and Bank of Ghana organized the workshop themed: “Deposit Protection – A Catalyst for Financial Stability,” to facilitate interactions among experts working in different areas of regulation and financial stability to allow for the sharing of regional and global experiences on effective deposit protection schemes and to ensure that best practices are incorporated to foster trust and enhance confidence in the financial sector.

Dr. Addison explained that banks’ failures impose enormous strain on the public purse, and on fiscal policy management, affecting the economy as a whole. “In the absence of an effective scheme, as has been the case in Ghana until now, the failure of banks and specialized deposit-taking institutions would suddenly place an enormous burden on tax payers’, as the government would be compelled to finance pay-outs to depositors in an attempt to forestall the potential for a bank-run and help contain threats to financial stability.”

The Ghana Deposit Protection Corporation (GDPC) was established by the Ghana Deposit Protection Act, 2016, (Act 931, as amended) to protect small depositors against losses in the event of the materialization of an insured financial sector shock.

Commending organisers of the event, Dr Addison noted that the establishment of GDPC comes as a big relief and a welcome addition to Ghana’s financial safety net apparatus, “as it puts the nation in a state of readiness to better manage the failure of banks and deposit-taking financial institutions in the future.”

Vice President and Leader of the Economic Management Committee, Dr. Mahamudu Bawumia, in his keynote speech, expressed optimism at the scheme’s ability, in addition to regulations from the Bank of Ghana, to set the country’s financial sector on a path to financial stability.

“We are putting this in place as part of measures that are being put in place to strengthen the financial system, as we integrate into the global financial system.

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 efforts to locking in the gains of financial sector reforms carried out over the last two years,” Dr. Bawumia added.

He urged the newly inaugurated board and management of the GDPC to be innovative and ensure that the scheme operates in a manner that is consistent with protecting depositors’ funds as mandated.

The Secretary General of IADI, David Walker in his statement also noted that, considering the high financial and economic activities that go on in the African continent, deposit insurance according to him, “has become an integral part of African financial and economic development.”