The Central Bank of Kenya has put forward concerns of the proposed Financial Markets Conduct Bill 2018 drafted by The National Treasury last week. The draft aims at creating an effective financial consumer protection, make credit more accessible and at the same time supporting financial innovation and competition.
The bill draws heavily from the Twin Peaks model of financial regulation that was pioneered in Australia and separates financial regulation into two broad functions: market conduct regulation (which includes consumer protection) and prudential regulation. These functions are vested in a separate regulator.
The new bill had earlier been discussed in 2016 where the regulator had asked for an incremental approach where a product is designed, implemented and tested incrementally (a little more is added each time) until the product is finished. This involves both development and maintenance.
“This bill does not deal with the rate cap issue and fundamental issues that led to the interest rate cap. In our view it’s a step in the wrong direction. The bill emasculates the Central Bank and stripping down powers and indeed other things as well.” Central Bank Governor Patrick Njoroge noted at a press conference in Nairobi on Tuesday.
Action points addressed in the proposed bill that are a threat to the CBK
The banking act is subordinated in the financial markets conduct bill.
It repeals certain provisions under the banking act for approval of fees, charges and other prudential guidelines. The bill also repeals provisions in the banking act for CBK to deal with reckless lending.
The bill further limits the power of the central bank to issue prudential guidelines to banks and place banks under receivership.
The Governor is concerned that the proposal will limit the bank’s mandate and independence as a regulator.
“Our concern has always been proposing something that will be sustainable and address concerns that led to the capping of interest rate caps. It is also not consistent with the envisaged regulatory frame work and architecture of the East Africa community.” says Njoroge.
