About Deposit Protection
Deposit Protection is a financial insurance scheme that protects small depositors by ensuring prompt payment of depositors’ funds in the event of the occurrence of a bank failure. It is a scheme established by Governments and Regulators across the world to promote trust in the financial system.
Deposit Protections aims to protect depositors against the loss of their savings when an individual depository institution fails. This protection reinforces trust in the financial system and averts bank runs. Deposit Insurance is referred to as an “explicit” system, where the cost of protecting deposits is largely borne by the financial industry, in contrast to a system where there is an implicit expectation that the government will step in to protect all depositors or even all creditors of a depository institution.
"The International Association of Deposit Insurers (IADI)'s Core Principle states that "membership in a deposit insurance system should be compulsory for all licensed Deposit Taking Financial Institutions".
In most jurisdictions, promoting financial inclusion does not fall explicitly within the mandate of the deposit insurer, other participants in the financial safety net need to stay abreast of financial inclusion initiatives and associated technological innovations occurring in their jurisdictions, particularly those affecting unsophisticated small-scale depositors. It has been noted that, the involvement of deposit insurance in the promotion of financial inclusion, for example the extension of coverage to deposit-like stored value products, should be undertaken with the strong engagement of, and coordination with supervisory authorities and other financial safety-net participants. In addition, public awareness campaigns should adequately address what types of deposits and money transfer vehicles are covered by deposit insurance and what types are not, in order to minimize potential confusion among small-scale depositors and financial service providers alike.
Deposit Protection in Ghana
The Ghana Deposit Protection Scheme was established by the Ghana Deposit Protection Act, 2016, Act 931 as amended. The scheme seeks to protect a small depositor from loss incurred by the depositor as a result of the occurrence of an insured event. The object of the scheme is to support the development of a safe, sound, efficient and stable market-based financial system in Ghana, by ensuring prompt payouts to insured depositors on the occurrence of an insured event.
Ghana's Deposit Protection Scheme was conceived based on feasibility studies conducted in the year 2012 and with collaboration between the Bank of Ghana and the Government of Ghana. Technical support and financial assistance was also provided by the German Government through KfW, a German state-owned development bank.
Ghana's Deposit Protection Scheme is a pay box and becomes operational by end of September 2019. Ghana's Deposit Protection Scheme has a two fund-structure; Fund A, from which reimbursements of depositors of banks shall be made, and Fund B, from which reimbursements of depositors from Specialized Deposit Taking Institutions shall be made.