State advised to merge financial regulators

By James Anyanzwa

The Government has been advised to set up a single regulator for financial services to help deepen the sector.

Standard Group Vice Chairman and Strategy Advisor, Paul Melly, said the current laws are too weak, and encourage duplication of work, high operation costs, regulatory arbitrages and compliance challenges.

Addressing participants at a Mobile-Banking Conference at the School of Monetary Studies in Nairobi yesterday, Melly challenged policymakers to draft new regulations for financial services.

He said a consolidated regulatory framework for retirement benefits schemes, insurance companies, capital markets and commercial banks, was long overdue.

"We have a multiplicity of regulatory agencies in Kenya. We need to rethink the entire financial sector," Melly said.

The proposed Financial Sector Authority will merge the existing regulators into a single entity for easier administration.

They include the Central Bank of Kenya, Insurance Regulatory Authority, Retirements Benefits Authority and the Capital Markets Authority.

Melly said these institutions have been tempted to engage in transactions outside their mandate, as the financial markets grow more sophisticated.

Increased oversight

Addressing the same participants, Mr Stephen Mwaura Ndwati, Head of Payment Systems at CBK, said developments in the financial markets would require the banking regulator to expand its oversight role. "We need to increase our oversight mandate," said Ndwati.

Mr Charles Njoroge, the Communications Commission of Kenya (CCK) Director General said a dual regulatory framework from CCK and CBK was necessary in order not to stifle growth of technology in the sector.

"The current regulatory space has no specific guidelines for such business," said Njoroge.

On his part, Melly noted that regulators must be dynamic by willing to adapt to changes in emerging technology.

They must also engage the media and share information, "otherwise the media might have to rely on sources that are always not credible." The current regulators are overly sensitive to criticism, he added, and unwilling to share information with the media.

He, however, also expressed concern over gaps in the country’s media, to analyse critical financial statements, and understand of the workings of the financial markets regulatory regime.

Debate over mobile banking has increased, over issues related to oversight, and lobbying by commercial banks for stricter regulation.