By James Anyanzwa
Finance minister Robinson Njeru Githae has proposed a new system of financial sector supervision, which seeks to phase off multiple regulators with the aim of deepening the growth and development of the financial sector.
The new model announced last week, if adopted, will entail the merger of the four regulators — Central Bank of Kenya, Capital Markets Authority (CMA), Retirement Benefits Authority (RBA), Insurance Regulatory Authority (IRA) and Sacco Societies Regulatory Authority (SASRA) — into a single authority.
The proposed system borrows heavily from the UK’s form of financial sector regulation which has, however, been criticised for being inadequate to deal with the financial crisis which hit major world economies in 2008/09.
Some of the failures identified that triggered the crisis that originated from the US included failure in risk management in private financial institutions and market discipline mechanisms.
The key players in the global turmoil included financial institutions such as commercial banks, mortgage companies, investment banks, insurance companies, hedge funds and pension funds.
“It is my wish at the Treasury to come up with one institution to regulate the financial sector,” Githae told reporters, adding that, “we want all those bodies to be under one financial authority so as to expand financial incentives.”
The minister’s proposal has, however, drawn mixed reactions with majority of market players who spoke to Business Weekly.
“There are advantages and disadvantages of the proposal and it is difficult to evaluate which of the two models — single financial services regulator or multiple regulators — is ideal says Habil Olaka, Chief Executive Kenya Bankers Association (KBA). “The proposal may have been as a result of the shortcomings of the current regime but we need to be alert to the disadvantages of having a single regulator.”
CIC Insurance Group Managing Director Nelson Kuria believes the country’s existing financial sectors are distinct and specialised so it would be difficult to put them under one regulator as this will compromise professionalism.
“These sectors are specialised and the dangers of having just one regulator could comprise professionalism,” Kuria told Business Weekly.
“I don’t think we are ready for a single financial sector regulator.”
The existing regulatory framework consists of the independent regulators each charged with the supervision of their sub-sectors.
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