Gatabaki opposes proposal to merge financial regulators

The Capital Markets Authority (CMA) chairman, Kung’u Gatabaki, has opposed the proposal to merge financial sector regulatory authorities, arguing it amounts to rolling back progress made in strengthening supervision of the sector.

Mr Gatabaki said the proposals, put forward by Finance minister Njeru Githae in the 2012-13 national Budget, would weaken oversight of financial service providers.

“The proposal to centralise the regulatory powers of the financial sector came as a surprise. At a time when we are moving towards more decentralisation, I don’t see why we should create a monolith,” said Mr Gatabaki.

Mr Githae’s proposal would merge the Central Bank of Kenya, CMA, the Retirement Benefits Authority (RBA) and the Insurance Regulatory Authority (IRA).

The CMA chair said he it would be more prudent to give more powers to the existing regulatory authorities to address any current weaknesses.

Mr Githae had said in his June 14 budget statement that financial sector regulators would be consolidated “to further strengthen the supervisory capacity, safeguard stability and enhance efficiency of the financial sector regulators, the Government will shortly commence a process to establish a consolidated financial sector regulatory framework,” said Mr Githae.

The Retirement Benefits Authority CEO, Edward Odundo, was however non-committal on the finance minister’s proposal.

He said while consolidation of financial services are likely to minimise administration costs, independent regulatory units tended to be more focused on their roles than one large organisation.

“I cannot take a position authoritatively because I don’t have the details of what it will entail,” said Mr Odundo.

Setting up an overarching financial industry regulatory authority will require a review and harmonisation of the existing laws governing each of the existing regulators.

“The current regulators are at different stages of development. We need to see the Companies Act harmonised with the Capital Markets Act,” said Coutts Otolo, the CEO of accounting firm Crowe Horwath EA, during a recent conference called by the Association of Certified Chartered Accountants (ACCA) Council in Nairobi.

The existing regulators are at different stages of development having been set up at different times, the latest to be set up was the IRA some three years ago.

RBA was established in 2000 and the Capital Markets Authority in 1989. The Central Bank of Kenya (CBK) was set up in 1966.

A CBK source, who spoke on condition of anonymity as he has no authority to speak to the press, said that even regulators in Europe such as the UK’s Financial Services Authority (FSA), were slowly rethinking the centralisation move because they were unable to police the sector competently.

IRA chief executive Sammy Makove was not available for comment as he was said to be in meetings out of office.