The Bank of Ghana (BoG) is set to introduce a new Deposit Protection Scheme to enhance its regulatory powers in dealing with illegal and unlawful deposit taking institutions.
The scheme, which is contained in a new Banking and Specialized Deposit Taking (SDT) Bill is before parliament and expected to replace the existing Act.
When introduced, the Deposit Protection Scheme would build resilience into the banking sector through the provision for safety nets for small savers; and order the resolution of weak banks.
It will further provide clear procedures for resolving challenges from distressed banks, and outline roadmaps for mergers.
Head of Banking Supervision Department at the BoG, Mr. Franklyn Belnye explained that the Bill will provide consumer protection and allow the development of Consumer Protection Codes, as well as strengthen customer complaint procedures in the financial sector.
“It is in anticipation of the future banking landscape that the BoG has been working on a number of initiatives to make the banking sector more secured and opened to the consumers ”, he said.
Mr. Belnye was optimistic the Bill would address concerns about confidence in the banking system, particularly, in the wake of mushrooming microfinance institutions that are illegally performing the basic deposit taking functions of the banks.
Touching on some proposals from experts to do away with the Statutory Reserves in the new Banking Act, Mr. Belnye rebutted that it is a necessary requirement that serves as an automatic buffer for building bank’s capital to ensure the retaining of wealth in support of their operations.
“Statutory Reserves are included in determining a bank’s Capital adequacy; only that they are not available for distribution to shareholders”, he said adding that “there is logic behind Statutory Reserves and this is not peculiar to Ghana”.
Presently, the main advocates for the repeal of the Statutory Reserve requirement are the proponents of the BoG’s migration to the Basel II/III and the ICAAP process, which will shift emphasis away from discrete paid up capital to a determination based on business lines and the accompanying risks.
However, Mr. Belnye insists the migration does not obviate the need for an internal source of capital generation.
He revealed that the BoG is also pursuing policies in the payment system infrastructure development aimed at providing alternative channels, convenience and secured payment methods.
Led by the GhIPSS, these innovations into the payment systems of the country is expected to limit the issue of cyber fraud while it propels the economy into a cashless one.
