President approves GHC15.6 billion cover to protect banks and depositors Featured

President Akufo-Addo has granted approval for an expenditure of over GHC15 billion “towards protecting depositors and investors in failed financial institutions and to improve the liquidity of the financial sector”.

The approval was granted in a letter dated November 29 2019, signed by Nana Bediatuo Asante, Secretary to the President, in response to a request by the Minister for Finance.

The Minister has accordingly requested Parliament to approve the expenditure. In a memo to the House, Ken Ofori-Atta said the sum covers all fiscal interventions in the financial sector, starting from 2017.

On course

Meanwhile, the Minister of Information, Kojo Oppong Nkrumah, says the government is on course to securing parliamentary approval for the expenditure.

According to Mr Oppong Nkrumah, who is also a member of Parliament’s finance committee, the request for funding has not been rejected by MPs, as some media reports have claimed.

The committee received the request from the Minister for Finance at a meeting on Thursday.

The committee’s report is expected to be taken to the plenary this week for parliamentary approval, Mr Oppong Nkrumah says.

“This is an indication of the President’s commitment to ensuring that depositors who were affected will receive their funds and [it will] improve liquidity of the financial sector,” he said in a statement published yesterday.

Breach regulations

The Bank of Ghana (BoG) revoked the licences of two commercial banks in 2017. The action was triggered by their inability to turn around their negative capital adequacy position, which had lingered for some time.

The assets and liabilities of both banks were taken over by GCB Bank in August 2017.

Five other banks were later amalgamated to form Consolidated Bank Ghana (CBG).

Also in 2018/19, the BoG undertook a comprehensive review of savings and loans companies (S&Ls) and finance houses. The exercise revealed that the levels of capital held by some of these institutions were in violation of the regulatory minimum capital requirement.

A further assessment of the microfinance industry and microcredit sectors also showed signs of distress, arising from various breaches. This led to the collapse of 347 microfinance and microcredit companies.

Also in 2018, the Securities and Exchange Commission (SEC) carried out a forensic overview of the asset management industry and noted that fund managers were investing heavily in fixed deposits with non-banking institutions.

The industry had total assets of GHC19 billion-plus, held in pension funds, collective investment schemes and other discretionary funds.

Following this, the licences of 53 asset management firms were revoked in November 2019.

Total exposure

In his memo to Parliament, the Finance Minister said that a Bank of Ghana mapping exercise on exposures between and across financial institutions has shown that, as at September 2019, total exposures of the banks to other financial institutions stood at approximately GHC1.54 billion.

He also said that the total exposure of banks to the securities industry was approximately GHC839.42 million, with the banks’ total exposure to the insurance industry at approximately GHC33.44m.

The total exposure of banks to special deposit institutions (SDIs) was approximately GHC669.51m, and that of the pension industry roughly GHC863.63m.

The insurance industry had also placed GHC839.33m with the banks.

Total exposure of SDIs to the universal banks was approximately GHC933.64 million, the Finance Minister’s memo said, adding: “Total exposure of Savings and Loans institutions to other financial institutions were approximately GHC637.61 million and the Savings and Loans industry held approximately GHC467.73 million of other financial institutions’ funds.”

* Correction: The version of this story published in the print edition of the Daily Statesman of December 9 2019 wrongly suggested that Consolidated Bank Ghana was formed through a merger of seven banks.

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