In Kenya, financial regulation is split among five bodies: the Central Bank of Kenya (CBK) for banking, the Capital Markets Authority (CMA) for investments and the capital markets, the Insurance Regulatory Authority (IRA) for insurance, the Retirement Benefits Authority (RBA) for pension oversight and Sacco Societies Regulatory Authority (SASRA) for SACCOs. All of these institutions draw their mandate from the Laws of Kenya and regulate all the companies that fall within their respective realms.
Regulation, especially within financial services is crucial. Governments create regulatory bodies that oversee specific industries to protect the consumer and build their trust in the field. Regulators act as independent parties, which oversee the activities of financial institutions on the consumers behalf, giving them peace of mind that their interests have been considered.
In the financial services space, regulation is also necessary to maintain financial stability, which is why their guidelines are applied more intensively than in many other sectors. All of us depend on the financial system in some way and we need it to be functional in order to carry on with our business. Poorly regulated financial institutions have the potential to undermine the stability of the financial system, harm consumers and can damage the prospects for the economy. The presence of regulation ensures that this very important system runs as smoothly as possible.
Additionally, financial regulators ensure that the markets are fair, efficient and transparent, which reduces risk and promotes best practices. Essentially, this means that financial institutions are only allowed to act in ways that are beneficial. This involves monitoring firms to ensure they transact lawfully and safely, have the appropriate risk controls in place and are appropriately governed.
Lastly, regulation provides an avenue for users of financial services as well as financial institutions to seek redress in case of abuse by the other party. There is the need for an impartial party to mediate between customers and service providers. Regulators are empowered by the law to play this role.