Top jobs on the line as financial services regulators are merged

From left, CMA chief executive Paul Muthaura, IRA chief executive Sammy Makove and Edward Odundo, chief executive of the Retirement Benefits Authority. PHOTOS | FILE
From left, CMA chief executive Paul Muthaura, IRA chief executive Sammy Makove and Edward Odundo, chief executive of the Retirement Benefits Authority. PHOTOS | FILE 

The Treasury has published a Bill creating a single regulatory agency for the financial services sector, putting chief executives of four regulatory agencies and their boards en-route to losing their plum jobs.

The Bill, which proposes to merge the Capital Markets Authority (CMA), the Retirements Benefits Authority (RBA), the Insurance Regulatory Authority (IRA) and Sacco Societies Regulatory Agency (Sasra) into the Financial Sector Authority (FSA), has been in the works for the past three years.

It eliminates the current leadership structure that created an independent agency for each of the sub-sectors complete with independent boards of directors.

If Parliament passes the Bill Sammy Makove, the long-serving Insurance commissioner, RBA’s Edward Odundo, John Mwaka of Sasra and Paul Muthaura, who was confirmed as CMA boss last month after a four-year acting stint, may soon be without jobs.

The Treasury is seeking to delete clauses that create the boards of directors and the positions of chief executives in current regulatory Acts.


“There shall be a Chief Executive Officer for the authority, who shall be appointed by the board in consultation with the Cabinet Secretary,” the Bill says, meaning the new agency will have one chief executive.

The dissolution of the boards will also render jobless James Ndegwa who chairs CMA, IRA’s Abdirahin Haithar Abdi, who also sits on the board of CBA Bank, lawyer Kanyi Gachoka of RBA and Sasra’s Eunice Mwangi.

The four agencies collectively have 39 board members, including the principal secretary at Treasury who sits on all the boards.

More job losses are expected to come with the merger when the FSA gets down to dealing with duplication of roles across the service areas.

The Treasury has, however, sought to reassure employees of the four institutions of their absorption in the new body.

“All persons who, before the commencement of this Act were employed by a predecessor regulator shall, at the commencement of this Act, be taken to be staff of the Authority and employed in accordance with this Act on terms no less favourable than their terms of employment immediately before that time,” the Bill says without stating how it will deal with duplication or roles.

The four authorities are currently estimated to have a total of 420 employees with an annual wage bill of Sh1.1 billion.

Regulatory bodies were in 2014 asked to freeze recruitment plans till late last year as the government considered the consolidation plans.

Jostling for the new powerful position is expected to be aggressive given the high standards set in the proposed law. Candidates will be required to have a Master’s degree and 10 years management experience, five of which are in senior management.

The chief executive of the FSA will serve for a four-year term renewable once.

Mr Makove has served as commissioner of insurance since 1987 while Mr Odundo has been heading the RBA since 2001.

Consolidated regulatory bodies

The Treasury has for long argued that consolidating regulatory powers will create an institution that is capable of understanding and monitoring risks across the sub-sectors as well as develop policies to address the risks facing the entire industry.

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

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

Under the merged set-up, regulators will be required to seek new operating licences from FSA within a two-year period of the authority’s formation with a grace period of six months.

The Central Bank of Kenya is the only regulator left out of the consolidation process and will continue its role as the independent supervisor of the banking sector.

The Bill, however, demands that the FSA work together with the CBK, especially in the monitoring of lenders who have diversified into other businesses such as insurance.

Holding companies, which own banking and other financial businesses, will be answerable to both the CBK and the FSA.

Financial sector levy

The Bill also removes financial accountability from the current regulators and transfers it to the new authority.

Subjects of the authority will be required to pay a financial sector levy, which the Treasury proposes to be at the same rate as currently remitted to existing regulators.

The rates will remain stable for a five-year period after the new law comes into force.  

The Investor Compensation Fund managed by the CMA, the IRA’s Policyholders Compensation Fund and Sasra’s Deposit Protection Fund will also be merged under the FSA, putting it in charge of billions of shillings.

As at end of 2013 the policyholders compensation fund had Sh3.1 billion while the investors fund held Sh515 million.

Treasury secretary Henry Rotich has also created a financial sector ombudsman under the Bill, dissolving the tribunals that currently deal with disputes under each of the four regulators.

The creation of the Ombudsman’s office puts Kenya at par with other international players where the arbitrator receives complaints from the public concerning financial service providers.

No fees or charges shall be payable by a financial customer to make a complaint to the Ombudsman, the Bill says.

The proposed law introduces hefty penalties for companies which do not comply, especially on management of unfair business practices and unlicensed products.