About GH¢6.3 billion of funds invested by asset fund managers in the asset management industry are locked up in risky investments.
This comprises short-term unlisted bonds, direct private-equity stakes and related-party deals for small and medium-sized businesses.
The Securities and Exchange Commission (SEC), which made this known, courtesy to a forensic review it undertook of the asset management industry last year, said fund managers invested heavily in fixed deposits within the non-banking sector.
“With the failures of some banks, savings and loans companies as well as microfinance firms, these investments have become toxic,” it emphasised.
SEC said it was as a result of the foregoing that the licences of 53 asset management firms were revoked in November 2019.
And such reasons underlie why the Ministry of Finance has written to Parliament to seek approval for a total amount of GH¢15.6 billion to enable it pay off investments and funds that have been locked up with some insolvent banks and financial institutions.
According to SEC, the asset management industry in Ghana had a total asset of over GH¢19 billion (as at end 2018), held up in pension funds, collective investment schemes (CIS) and other funds (discretionary funds).
A memo by the Finance Ministry to Parliament which lends credence to the above-stated, said: “It is worth noting at this point that the financial sector is highly interconnected. A mapping exercise conducted by BoG on exposures between and across financial institutions in the Ghanaian economy shows that as at September 2019 total exposures of banks to other financial institutions were approximately GH¢1.54 billion.
“Total exposures of banks to the securities industry was approximately GHȻ839.42 million. Banks' total exposure to the insurance industry was approximately GH¢33.44 million. Total exposures of banks to SDIs was approximately GH¢ 669.51 million.
It continued that “The pension industry's exposure to banks was approximately GHȻ863.63 million. Insurance industry have place an amount of GH¢839.33 million with banks. Total exposure of SDIs to the universal banks was approximately GH¢933.64 million,” it stated.
Additionally, it said the total exposure of savings and loans institutions to other financial institutions were approximately GHȻ637.61 million while the savings and loans industry held approximately GHȻ467.73 million of other financial institutions funds.