Tuesday, January 25, 2022

Government aims to establish non bank financial regulator

The Government danced to the increasing winds of change in the global financial system by putting in place the non-banking financial service watchdog aimed at making the system more effective and crime free.

According to a bill published in the government Gazette last month, government will establish the Non Banking Financial Institution Regulatory Authority – equivalent to the UK’s Financial Authority – to ensure that the non banking financial sector operates in an efficient and orderly manner.

The move was prompted by the mushrooming of non-banking financial institutions and the rapid increase in assets, that run into tens of billions of pula under the management of the industry which is less regulated.

“I think it is a good move given the amount of money managed by the non banking financial institutions,” Tapologo Motshubi of Allan Gray said on Friday.

The bill, if passed by parliament, would see insurance companies, fund management outfits, stock exchange and collective investment undertakings being put under scrutiny to avoid cases of conflict of interest and other financial crimes.

It would also enhance the status of Botswana registered companies-especially those registered under the International Financial Service Center.

“ The Regulatory Authority’s principal objective is to regulate and supervise non banking institutions so as to foster their safety and soundness, the highest standards of business conduct, fairness, efficiency and orderliness of the non bank financial sector and the stability of the financial system,” the Government Gazette stated.

Among the key factors the authority will have to draw prudential rules to ensure that the currently less regulated sector does not cause mayhem in the financial market that can lead to the collapse of the economy.

The prudential rules will ensure that Botswana registered non bank financial institution work along internationally accepted standards by ensuring that they are run by people with prudential skills, subscribe to good corporate governance, meet the set capital and liquidity requirements and use prescribed financial instruments and off balance sheet transactions among others.

The authority, which is expected to give a wide range of powers to carry surprise checks on the conduct of the non-bank financial institution, will be beefed up by a team of investigators to ensure that they are not involved in financial crimes.

It also recommends some punitive actions, which can go tenfold, the damage caused by the company accused of breaching the convent rules. And, it also proposes automatic cancellation of the operating license, if the company is found to be in breach.


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