Minister hints at merger of regulators

A single supervisory body will be created to watch over the financial sector in a bid to promote stability .

The consolidated financial regulatory framework will bring together the Capital Markets Authority, Insurance Regulatory Authority and the Retirement Benefits Authority.

Finance Minister Njeru Githae made the announcement in the Thursday budget statement.

The minister appeared to suggest that the other regulatory bodies will be put under a reconstituted Central Bank supervision department.

“The banking supervision department will be re-established as an entity under a reviewed CBK Act with a clear mechanism allowing for co-ordinated and effective financial sector supervision,” said Mr Githae.

He added that the consolidation of regulatory powers would “strengthen the supervisory capacity, safeguard stability and enhance efficiency of the financial sector regulators.

Creation of the overall supervisory body will see Kenya join the league of developed economies which have consolidated their regulatory bodies in the past 30 years.

They include the United Kingdom whose financial sector is supervised by Financial Service Authority (FSA), Australia, Canada, Germany and South Africa.

Those in favour of a consolidated regulatory body argue that such an institution will be able to understand and monitor risks across the sub sectors and develop policies to address the risks facing the entire industry.

Governments have been pushing for closer regulation in the financial sector following the global economic crisis of 2008.

The minister recommended enhanced supervision of banks with a presence in other countries arguing that the activities of the subsidiaries have a direct impact on the safety and stability of Kenyan banks.

“There is need, therefore, to focus on the transactions of their related parties.

To this end I propose to amend the banking act to provide for a robust and comprehensive consolidated supervision framework to enable the Central Bank to adequately supervise banks and their subsidiaries,” said Mr Githae.

The minister said that the consolidated supervision will hinge on information sharing and coordination between the CBK and other regulators in the region, where Kenyan banks are expanding their footprints.

Kenyan banks with regional presence include Equity, KCB, CBA, NIC, DTB and Fina Bank.