Government has procured a loan amount of 13 Million Euros with an extra 1 Million Euro grant amount to establish a Deposit Protection Scheme in Ghana to cushion depositors in times of Bank failure.
The loan amount which was procured through an agreement between the government of Ghana and Kreditanstalt Fur Wiederaufbau (KFW) of Germany, was approved by Parliament on Tuesday.
The Government and the KFW are through this agreement providing the seed money for the establishment of the Deposit Protection Fund whose establishment was proposed by its relevant law, (Act 931) for the operation of the Scheme.
The Ghana Deposit Protection Act, 2016 (Act 931) was passed in 2016 to establish a Ghana Deposit Scheme to be managed by Ghana Deposit Protection Corporation (GDPC).
The scheme is expected to help reduce disruptions in the financial system arising from banking distress and bank failure; contribute to financial stability and financial inclusion; as well as help increase confidence and trust in the financial sector; provide depositor protection, and help reduce government contingent obligation in the event of bank failure.
The objective of the loan Agreement is to provide funds for the establishment of the Deposit Protection Fund with the view to protect depositors from loss in the case of a bank failure and also to support the Bank of Ghana in meeting one its objectives of fostering the soundness, solvency and efficient functioning of a stable, market-based financial system in Ghana.
According to the Finance Committee Report presented by its Chairman, Dr. Osei Assibey, an amount of 500,000 Euros of the Grant amount 1 Million Euros would be used for the setting up and institutional strengthening of Ghana Deposit Protection (GDPC) whilst the remaining 500,000 Euros will be applied towards institutional strengthening of the Bank of Ghana.
It also indicated that the Bank of Ghana is also contributing an additional amount of equivalent to 13 Million Euros as counterpart funding for the Deposit Protection Fund as well as provide office accommodation, equipment, furnishing and initial staffing for the Ghana Deposit Protection Corporation (GDPC).
To ensure the sustainability of the scheme, banks and specialized deposit-taking institutions licensed by the Bank of Ghana would be required under Act 931 to make premium payments into the Fund. Again, monies accrued shall be invested to yield more funds to sustain the scheme.
Contributing to the motion for the approval of the loan agreement on the Floor of Parliament, some of the Members of the Minority group chastised the Central Bank for failing to find the money within its own resources to provide for the seed capital to protect depositors from financial institutions which they have exclusive oversight duties.
They also chastised the Akufo Addo led government over the Ghana beyond aid mantra and yet keep on chasing financial assistance from donor partners with the least provocation.
Source: Clement Akoloh/afriwakeradio.com