The Bank of Ghana has disagreed with an IMF recommendation on the Social Security and National Insurance Trust (SSNIT) over the latter’s role in the financial system.Contrary to a view held by the IMF that SSNIT’s dominance of the financial system “distorts” the system’s operations, the Central Bank said it sees the pensions-manager rather as a “stabilising force”. “SSNIT is more of a stabilising force than a risk,” Governor Amissah-Arthur told the Business & Financial Times.“I know about these reports; but some of these [are] reports that we disagree with,” he said.In a staff report issued after the third and fourth reviews of the ongoing economic programme with the government, the Fund noted: “An unresolved issue is the role of SSNIT in the financial system. Being a majority shareholder in several banks and a large depositor of others conflicts with its role as a manager of pensions, and distorts the operations of the financial system.”It continued: “The [Ghanaian] authorities recognised the importance of the issue, and intend to explore options for an exit strategy for SSNIT as a majority shareholder in financial institutions.”But Amissah-Arthur explained that being a pensions-manager, SSNIT adopts a medium- to long-term approach in its investments -- and is unlikely to be one to withdraw frequently from its deposits and investments – and therefore brings stability to the financial system.SSNIT, since its establishment, has held a dominant position within the financial sector. Besides being the biggest provider of pensions, it has significant shareholding in nine of the 27 commercial banks -- including majority shareholding in a number of them. It also holds a substantial amount of deposits in the banking system.In the capital market, it holds positions in 23 of the 35 companies listed on the stock exchange, and accounts for over 81% of local funds under management. Additionally, SSNIT is a primary dealer in government securities and holds significant equity in two insurance companies.For the financial system as a whole, SSNIT controls about 12% of total assets. As at December 2010 it held assets valued at GH¢2.74billion (US$1.88billion), representing 6% of GDP.Amissah-Arthur observed that the Trust has a huge incentive to be an active player in the financial system because its investments have been highly rewarding, enabling it to achieve its mandate as trustee of pensions.However, a worry for the Central Bank, he said, is that SSNIT does not seem to have an exit-strategy for its investments and lacks the required expertise to manage the banks and institutions in which it holds majority shares, saying the board of the Trust is considering ways to limit its involvement in these entities.In its report, the IMF also expressed worry about the state’s involvement in the banking system; noting its level of involvement is one of the highest in the sub-region.“Majority state-ownership in some banks has also contributed to weak risk-management practices, as well as overexposure to certain sectors and borrowers,” the Fund stated.The state has controlling interests in five banks, which account for 29 percent of the banking system’s assets, it said, and advised that ongoing reforms in the financial sector should give priority to reviewing the extent of state involvement in the banking industry.Meanwhile, a source at the ministry of finance has told this paper “the government does not always agree” with the views of the IMF, including its diagnosis of some of the economy’s challenges and the associated recommendations.