BOG Governor discusses ongoing challenges in finalising cleanup for SDIs

Bank of Ghana Governor Dr. Ernest Addison has addressed the ongoing challenges in the savings and loans (S&L) sector, highlighting that some institutions are still struggling and unable to repay depositors’ funds.

In an interview with JoyNews on Thursday, he explained that while the licenses of those S&Ls have not been revoked, they are unable to repay depositors. At the same time, the government currently lacks the resources to refund deposits to the affected individuals, according to him.

“We’ve been waiting for three years to get the budgetary resources to solve that problem. We would have wished that we had the resources to fully complete the cleanup on the S&L side, but we didn’t,” Dr. Addison remarked.

However, he argued that these institutions do not pose a systemic risk to the financial sector, stating that “when you look at their sizes and the amount of exposure they have, they really will not have a systemic impact.”

Dr. Addison also assured depositors that once the budgetary issue is resolved, the problem will be addressed. “This is an issue that has been part of our discussions with the IMF, and once the budgetary issue is resolved, that problem will be taken care of,” he affirmed.

In terms of depositors and investors, he confirmed that those who adhered to the deadlines set by the receiver have fully received their deposits. 

Further, Dr. Addison admitted that one of the mistakes made was the generosity of the government’s approach. According to him, “not only did depositors get their original defaults, but also the interest they had accrued over the years.” This, he believes, made the whole exercise very expensive.

He emphasised that the banking sector cleanup was not just about addressing immediate challenges but about laying the foundation for long-term growth. while ensuring all areas of the financial sector, including the savings and loans sub-sector, can effectively fulfil their roles.

In a recent report, the IMF acknowledged its collaboration with Ghana’s Finance Ministry to ensure that depositors of failed and operational but illiquid savings and loans institutions receive their due, though it did not specify a timeline for the settlement.