9 Questions and Answers about BoG shutdown of Savings and Loans companies

The Bank of Ghana on August 16, 2019, revoked the licences of twenty-three (23) insolvent Savings and Loans companies and finance house.

In a press statement issued on August 16, 2019 Bank of Ghana outlined the need for the financial sector clean-up and its relevance for the economy of Ghana.

Below are some important questions and answers about BoG financial sector clean up

QUESTION 1: Why did the Bank of Ghana revoke the licenses of the 15 savings and Loans companies?

ANSWER : The revocation of the licenses of these institutions became necessary because they are insolvent even after a reasonable period within which the Bank of Ghana has engaged with them in the hope that they would be recapitalized by their shareholders to return them to solvency.

QUESTION 2: Will depositors get their funds?

ANSWER: In line with the Government’s commitment to protect depositors’ funds, the Government has made funds available to enable the Receiver pay depositors after their claims are validated.

Question 3: Who takes care of the depositors of the shutdown Savings and Loans companies?

ANSWER: The Bank of Ghana (BoG) has appointed Eric Nana Nipah, a Director of PricewaterhouseCoopers (Ghana) Limited (“PwC”) as Receiver for the purpose of winding down the affairs of the collapsed Savings and Loans and Finance Houses.

QUESTION 4: What exactly will the receiver of the collapsed Savings and Loans Companies do?

ANSWER: According to the Bank of Ghana, the receiver, is to maximise asset realisations for the benefit of Creditors including mainly Depositors and distribute realisations in accordance with the relevant provisions of Act 930, to satisfy the indebtedness of these institutions to their body of Creditors, to the extent possible.

QUESTION 5: Why did the Bank of Ghana meet with shareholders prior to revocation of their licenses?

ANSWER: Meeting with shareholders was to discuss possible actions which could be undertaken to avert revocation of licenses. According to the Bank of Ghana, all efforts to get the shareholders and directors of the affected institutions to rectify the above lapses, especially the significant capital deficiencies, yielded no positive results.

QUESTION 6: What is the Bank of Ghana’s plan for the Rural and Community Banks in Ghana?

ANSWER: The Bank of Ghana will also work with ARB Apex Bank to reposition the rural and community banking sector, to enable them to better support rural economic development.

QUESTION 7: When and how will the Receiver disburse funds for the despositors of the collapsed Savings and Loans companies?

ANSWER: The Receiver will in due course make an announcement with regards to when and where payments will be made. The Receiver will also indicate documents required from depositors to facilitate the validation of claims and orderly payment of validated deposits.

QUESTION 8: How many financial institutions were affected by the Bank of Ghana Financial sector clean-up?

ANSWER: At the end of the Bank of Ghana financial sector clean, the following instititutions from the respective sectors have had licenses revoked; nine (9) universal banks, 347 microfinance companies (of which 155 had already ceased operations), 39 micro credit companies’/money lenders (10 of which had already ceased operations), 15 savings and loans companies, eight (8) finance house companies, and two (2) non-bank financial institutions that had already ceased operations.

QUESTION 9: Going forward what will the Bank of Ghana do differently to ensure the remaining financial institution are robust ?

ANSWER: The Bank of Ghana says its committed to ensuring that the banking, SDI, and NBFI sectors remain resilient, inclusive, and supportive of Ghana’s economic growth trajectory.

To ensure that the remaining institutions remain resilient going forward, the Bank of Ghana will remain vigilant, intensify on-site examinations and enforcement actions including the application of sanctions for non-compliance with statutory, prudential and other requirements, and ensure that early warning signs of distress are mitigated by regulated institutions expeditiously.

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Henry Cobblah

Henry Cobblah is a Tech Developer, Entrepreneur, and a Journalist. With over 15 Years of experience in the digital media industry, he writes for over 7 media agencies and shows up for TV and Radio discussions on Technology, Sports and Startup Discussions.

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