Regulators tighten noose on defaulters with pact on data sharing

By NICHOLAS WAITATHU

Regulators are closing in on loan defaulters and dodgy institutions. This follows signing of a Memorandum of Understanding (MOU) last week in Mombasa by five regulators in the financial sector.

The key component of the MOU is for the supervisors to share information on the activities they engage in their jurisdictions.

The new agreement seeks to enhance integrity in terms of activities being undertaken in the sector — both by individuals and management of the institutions. 

Key agencies

It is anticipated that the new pact will stem loan defaulting by members of financial institutions, limiting the development of financial products meant to benefit Kenyans.

The five regulators in the financial sector; the Capital Markets Authority, Central Bank of Kenya, Insurance Regulatory Authority, Retirement Benefits Authority and Sacco Societies Regulatory Authority signed the MOU last week.

It concerns collaboration in supervision of financial institutions and matters of mutual interest. “The regulators recognise that the exchange of supervisory information is necessary to support effective consolidated supervision of financial institutions operating under their respective jurisdiction,” the MOU says in part. “The Regulators commit themselves to exchange information with respect to licensing, registration, supervision, handling of financial institutions and other matters of mutual interest.”

 Under the agreement, regulators will collaborate to fast-track a number of issues to ensure all segments in the financial sector record progressive performance. 

Treasury Cabinet Secretary Henry Rotich who witnessed the signing of the agreement noted that the regulators will share information, conduct onsite information, registration and licensing, and risk based supervision.

Others roles will include staff exchange programmes, joint financial  literacy and coordinated public education campaigns, research and statistics, and coordinated review of emerging products. 

Rotich observed that the regulators will consolidate strategies to influence policy and legislation, review legal and regulatory frameworks, customer protection and compensation, investigations and enforcement action, joint capacity building, and programme coordination for development assistance work plans.

Market conduct

“In the past, a greater emphasis appears to have been placed on prudential regulation. This may have sufficed when the financial products on offer were basic vanilla products,” he said. 

“The ever-increasing adoption of exotic and complex financial products has, however, necessitated the need to focus on market conduct.”   Rotich added that the regulation of market conduct complements prudential regulation and sustains the desired public confidence and trust in the financial sector.

Parliament last year enacted the Consumer Protection Act, 2012. However, due to the unique nature of financial services, Rotich hastened to add that the National Treasury spearheaded the preparation of a draft Financial Services Consumer Protection Policy and Bill. 

 The financial sector controls assets worth more than Sh3trillion, with banks leading at Sh2.5trillion, pension schemes controlling over Sh500 billion and saccos managing about Sh300 billion.