Deposit Insurance Scheme, right direction

Insurance is a useful intervention capable of securing people against unforeseen risks. As a social device, it allows the individual to contractually transfer the potential financial consequences of a loss exposure to an insurer.

It also helps businesses protect themselves from risk and provides a wide range of services for ordinary people, from car and home insurance to pensions, among others.

Indeed, protection against the risks associated with everyday life is essential to everyone’s well-­being and peace of mind.

It is for this reason that the Daily Graphic welcomes the establishment of the Deposit Insurance Protection Scheme to protect depositors against the risk of banks’ collapse.

In our view, the establishment of the insurance scheme has become necessary because of the collapse and revocation of licences of some financial institutions in recent times.

Most of the collapsed or insolvent financial institutions suffered weak fundamentals, as poor corporate governance and risk management over the years led to high levels of non-performing loans and abuse of depositors’ funds through related parties and affiliates, in breach of regulatory requirements.

The deposit insurance scheme is, therefore, a measure to protect bank depositors, in full or in part, from losses caused by banks’ inability to pay their debts when due.

This forms part of the safety net provided in the financial system to promote financial stability.

For us at the Daily Graphic, the measure is a step in the right direction. It is to repose confidence in the banking system because it will ensure that no deposit will be lost and customers can continue to have access to their deposits without difficulty.

In view of the fact that we also struggle to raise billions of cedis to save depositors in the event of banks’ collapse, rolling out this scheme is a good safety guard which has multiple gains.

In the last two years, the government spent almost GH¢12 billion, which was not budgeted for, to rescue seven banks. It could have been saved a lot of blame if it had implemented its own deposit insurance scheme for which the law is already in place.

So, for us at the Daily Graphic, the establishment of the deposit insurance protection scheme is very timely because it will not just ensure that we take up insurance but also inject confidence and trust into the insurance and banking sectors, a sine qua non for building a savings culture in the people.

We cannot take insurance issues for granted. The truth of the matter is that since we do not know what challenges lie ahead, insurance policies come in handy to serve as a cushion when there is trouble.

We have not taken insurance issues seriously in this country, either because we do not know the value of insurance or refuse to appreciate its value.

Nonetheless, a lot more can be done and must be done by the insurance industry to step up mass education on the importance of taking insurance cover.

It is good for the masses to know that an important benefit of insurance is the reduction of uncertainty and worry.

We conclude that the introduction of the deposit insurance scheme in the country is long overdue, as it is a tool needed to insure depositors’ funds, just as banks insure their physical assets.