Governor of the Bank of Ghana (BoG), Dr Ernest Yedu Addison, has shed light on the incomplete cleanup of the financial sector, particularly focusing on the Savings and Loans (S&L) subsector. 

In an interview on PM Express Business Edition on Joy News on January 2, he acknowledged that while significant progress had been made, a lack of resources had stalled the revocation of licenses for some troubled institutions, leaving depositors in limbo.

Dr Addison was candid about the challenges faced in fully addressing the issues in the Savings and Loans sector.

“Okay, did we fully complete the cleanup? This is the question you are asking,” he began.

“The legacy we inherited, especially on the S&L side, includes some institutions that are still in trouble.

"Their licenses have not been revoked, and the reason is simple: the government does not have the resources to refund the deposits to the depositors.”

He stated that the issue was not one of oversight but of budgetary constraints.

“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 so that we could have fully completed the cleanup on the S&L side, but we didn’t,” he stated.

Despite the incomplete cleanup, Dr Addison reassured the public that the impact on the overall financial system was minimal.

“Fortunately for us, these are not systemic institutions. When you look at their sizes and the amount of exposure they have, they really will not have a systemic impact on the financial sector,” he explained.

However, he acknowledged the frustration of depositors still waiting for their funds.

“This is an issue that has been part of our discussions with the IMF. Once the budgetary issue is resolved, that problem will be taken care of,” he affirmed.

Reflecting on the broader cleanup efforts, Dr Addison highlighted the significant steps taken to address depositor concerns in other segments of the financial sector.

“Depositors and investors, as of the deadline given, those who respected the deadlines put out by the receiver, have fully received their deposits,” he noted.

He acknowledged that the government’s approach to compensating depositors was particularly generous.

“One of the errors that we did, I should say, was because the government was very generous with the intervention,” he admitted.

“Not only did depositors get their original defaults, but also the interest they had accrued over the years. It made the whole exercise very expensive, but most of them were paid.”

Dr Addison’s remarks highlight a key challenge for the financial sector’s recovery: balancing fiscal constraints with the need to restore confidence in Savings and Loans institutions.

While the central bank has contained potential contagion effects, he acknowledged the urgency of addressing unresolved issues to complete the sector’s cleanup.

“The banking sector cleanup was not just about fixing a broken system; it was about creating a foundation for long-term growth,” he said.

“We must ensure that all aspects of the financial sector can fulfil their roles effectively, including the Savings and Loans sector.”