Experts to discuss deposit insurance At Graphic Business / Stanbic breakfast meeting tomorrow

BY: Daily Graphic
Experts to discuss deposit insurance At Graphic Business / Stanbic breakfast meeting tomorrow
Experts to discuss deposit insurance At Graphic Business / Stanbic breakfast meeting tomorrow

Stakeholders and players in the banking sector are set to converge on the Labadi Beach Hotel in Accra tomorrow morning for the first edition of this year’s GRAPHIC BUSINESS /STANBIC BANK breakfast meeting.

The event, which will be held on the theme: ‘Deposit insurance: A catalyst for a stronger banking industry,’ will afford players in the banking sector the opportunity to deliberate on the pros and cons of deposit insurance, which is now mandatory following the passage of the Ghana Deposit Protection Act, 2016, Act 931 two years ago.

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It will also provide the platform for the central bank to give an update on the country’s state of affairs of the deposit insurance scheme.

The meeting will have the Governor of the Bank of Ghana, Dr Ernest Addison, as guest of honour.

Other speakers are Nana Otuo Acheampong who is the banking consultant, and Mr Seth Asante, who is a partner and Head of Financial Institutions and Capital Markets Practice Group at Bentsi-Enchill, Letsa and Ankomah.

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Deposit insurance

Deposit insurance is a protection provided by the state against risk of loss of deposits in a deposit taking institution.

Although, the practice is pronounced in most countries, including Nigeria, it is yet to be introduced here.

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Previous attempts to introduce it have stalled, with the recent being 2014.

The latest attempt, which is the most convincing, has the backing of the International Monetary Fund (IMF), which is helping the country to stabilise the economy with a four-year fiscal consolidation programme.

Deposit protection Act

Parliament in 2016 passed the Deposit Protection Act, 2016 which seeks to establish a deposit insurance (DI) scheme to protect depositors in the event of bank failure.

Under the deposit insurance scheme, the government and the Bank of Ghana (BoG) are expected to contribute €10 million each as seed capital towards its establishment.

The scheme, among other things, seeks to safeguard the savings of individual depositors in the country in order to build trust in the formal banking system and to contribute to the stabilisation and development of the financial system in Ghana.

To ensure the continuous flow of funds into the scheme, its members, which include banks and deposittaking institutions, would be expected to contribute an initial one-off premium amounting to 0.1 per cent of the required minimum paid-up capital and annual premium.

Sharing his views on deposit insurance ahead of the breakfast meeting, a former Governor of the BoG, Mr Emmanuel Asiedu-Mante, said conditions that warranted the operation of DI schemes in other countries were absent in Ghana, hence the need to reconsider the project.

Tracing the circumstances that led to the establishment of DI schemes, he said following the banking crisis in the United States of America in the 1930s, confidence in banks plummeted to record levels, prompting regulators at the time to innovate ways to reverse the trend.

One of those, he said, was the introduction of a DI scheme to inspire people to save.

“This is the philosophy behind deposit insurance in America. Now the same conditions do not prevail over here. Here, if you watch BoG data, you will realise that anytime bank’s deposits are going up, you will realise that deposit liabilities of the banks are going up.”

“This is because there is still a large chuck of unbanked people and all of them are being roped into the banking sector. So the question of confidence in banks does not exist here,” he said.