Savings and Loans firms are next – BoG

A few savings and loans firms have shown signs of insolvency and will have to be liquidated just as has happened with the banks, central bank Governor Dr. Ernest Addison has said.

Addressing a press conference after the Monetary Policy Committee’s meeting in Accra on Monday, Dr. Addison said: “We are discussing with the Ministry of Finance the measures which need to be taken to stabilise that segment of the market”.

He went on to say that the measures for stabilising the savings and loans segment of the financial market “are no different from the measures that have been taken with regard to the banks”, adding that: “If these savings and loans companies are insolvent, they will have to be liquidated; that is the solution for insolvent financial institutions”.

The deposits of these institutions, he said, are not insured; for which reason there has to be a cost associated to dealing with them, with implications on the budget.

“This is where we are in the discussions. What sort of intervention to make in that segment of the market. Who will pay for the cost of resolution in that sector? Once we reach a conclusion, the necessary thing will be done,” he said.

Already, the failure of seven banks is costing the taxpayer well in excess of GH¢8billion, which could actually go up since the clean-up exercise is not over.
According to the central bank, there are currently 37 licenced savings and loans companies operating across the country.

No deposit lost

The Bank of Ghana boss stated that financial institutions that have funds with the collapsed banks are to be taken care of so they are able to meet obligations to their own customers.

“One of the guarantees government gave, even in the case of UT and Capital Bank and recently the five consolidated banks, was for the deposits of financial institutions.

“So, with the deposits – because of this interconnectedness between financial institutions and the impact of this on systemic stability, we were very careful to ensure that financial institutions that are exposed to each other will be taken care of under the arrangements we put in place.

“We are ensuring that all institutions which have their deposits with the affected banks have been guaranteed and are receiving their funds,” the BoG boss stated.