The National Treasury is spearheading the rolling out of a merged financial services regulator as recommended in the Report of the Presidential Taskforce on Parastatal Reforms (October 2013), to be referred to as the Financial Services Authority (FSA). The FSA is proposed to be a merger of the four regulators in the sector namely the Retirement Benefits Authority (RBA), the Insurance Regulatory Authority (IRA), the Capital Markets Authority (CMA) and the Sacco Societies Regulatory Authority (SASRA). It is notable that the four regulators proposed for merger already have a working Memorandum of Understanding allowing them to coordinate their regulatory roles.
The rationale for the merger is to provide a better organized regulatory approach to the increasingly integrated and converged financial services industry and establishment of financial conglomerates. This will ensure that industry players do not get opportunities to exploit gaps in regulation (regulatory arbitrage) or in consumer protection. Further, the merger provides an opportunity for a standard approach to product governance and service delivery to be developed under a market conduct framework.
The following are the National Treasury priorities in carrying out reforms to the Kenyan financial sector regulatory framework: -
- Consistent with Kenya’s aspiration to become a regional financial center, the need for enhanced and formalized systemic (macro-prudential) surveillance and oversight, stronger institution-level (micro-prudential) supervision, and a formalized and strengthened crisis management framework.
- Recognition of the trade-off between financial stability and more effective market conduct (and the consequent need to balance the two).
- The need to protect consumers of financial products through effective consumer education, financial literacy, and preserving diversity in supply of financial instruments.
- The need for flexibility for the architecture to adapt to future changes in the market as they occur.
The National Treasury has now released the Draft Financial Services Authority Bill which you can access here.