New Deposit Protection law: Banks face ad hoc inspections

Governor of the Bank of Ghana, Dr. Ernest Addison

 

Commercial banks and other deposit taking institutions face ad hoc inspections by the Ghana Deposit Protection Corporation under the amended Ghana Deposit Protection (Amendment) Law, 2018.

The stringent supervisory function is imperative to provide protection for mainly small depositors in the case of institutional failure, especially unsophisticated depositors who have little or no information or knowledge about banking operations.

Clause 8 of the Amended Act empowers an employee of the Ghana Deposit Protection Corporation to enter the premises of a bank or specialised deposit-taking institution for the purpose of inspecting deposit-related records and activities of that institution.

Furthermore, the law also excludes the requirement of a bank or specialised deposit-taking institution to indemnify the Corporation in the event of a payment made by the Corporation to depositors of the bank or specialized deposit-taking institution in respect of deposits transferred or acquired by another bank or specialised deposit-taking institution.

Other amendments deal with the sources of money for the protection fund, with two amendments made to this section: the first provision mandates the Corporation to pay into Fund ‘A’ returns on investment less an amount not exceeding twenty percent of the income for the year, which may be appropriated to meet Corporation’s operational expenses.

The second amended provision mandates the Corporation to pay into Fund ‘B’ returns on investment less an amount not exceeding twenty percent or the income for the year, which may be appropriated to meet operational expenses of the Corporation.

The amendments made are to enable the Corporation spend a given percentage of the income accruing on the Protection Funds.

Background

The Ghana Deposit Protection Act, 2016 (Act 931) was enacted to provide a legal framework for banks and specialised deposit-taking institutions to insure depositors under a Scheme operated by the Ghana Deposit Protection Corporation.

Though section 54 of Act 931 requires the Ghana Deposit Protection Corporation – established under the Act – to insure depositors of existing banks and specialised deposit-taking institutions within six months after commencement of the Act, the Bank of Ghana has signalled that it needs a little more time to do so.

Key among the concerns raised by key stakeholders is the need to give eligible institutions the needed time to address any prudential deficiencies, so as to ensure that as many eligible institutions as possible are included in the Ghana Deposit Protection Scheme.