In May, Kenya’s National Treasury published the first draft of the Financial Services Authority bill which set out plans to merge four regulators in the sector into one overarching watchdog, to be known as the Financial Service Authority (FSA).
The bodies to be combined include Retirement Benefits Authority (RBA), the Insurance Regulatory Authority (IRA), the Capital Markets Authority (CMA) and the Sacco Societies Regulatory Authority (Sasra).
Kenya’s Fund Managers Association (FMA) has raised fears that creating a financial ombudsman unit funded by levies paid by the industry, as proposed in the reforms, could lead to higher costs for consumers.
“The impact of these fees and charges is likely to be passed on to clients, raising costs to the clients,” said the FMA in its feedback to the CMA.
However, a well-placed adviser in Kenya, who preferred to remain anonymous, told International Adviser the proposals have been welcomed by most of the industry, which in recent years has benefited from a “rapidly growing domestic middle class”.
“At the moment, Kenya is regulating different parts of the financial services industry separately and the only way of getting that right is to amalgamate it so that you can apply rules across the board rather than having people pick and choose which licences they want.
“That can only be a good thing,” said the source, who runs a Nairobi-based advisory firm.
The National Treasury said the reforms are part of a wider move to promote Kenya as a regional financial hub to rival the likes of South Africa – the continent’s most sophisticated market for financial services.
South Africa’s RDR
Like South Africa, Kenya’s restructure could also signal that it may be considering a fee-based model for the financial services industry.
Last month, South Africa’s Financial Services Board (FSB), confirmed that the first phase of its RDR regulation will be introduced on 1 January 2017.
The FSB also plans to shift all of its prudential work on to the Prudential Authority at the country’s Reserve Bank, will reorganising itself as the Financial Sector Conduct Authority (FSCA).
It comes amid a global push by regulators worldwide to mirror the UK Financial Services Authority’s (FSA) transformation into the Financial Conduct Authority (FCA) in 2012, shortly before it introduced the Retail Distribution Review (RDR).