Sunday, May 22, 2022

Government expedites the setting up of Non Banking Financial Authority

The Botswana government is to fast-track the establishment of the non-banking financial authority in an attempt to deal with the unregulated financial markets, the Permanent Secretary in the Ministry of Finance said last week.
His comment comes after the appointment of a six member board which is headed by Botswana Development Corporation’s chief executive officer, Kenneth Matambo, and which will oversee the operations of the financial sector.

“We have recently advertised the post of the CEO of the Non Banking Financial Authority both locally and regionally. The hope is that when the minister inaugurates the board this month we will quickly set-up a skeleton staff that will run the officeÔÇöahead of the appointment of the chief executive officer,” he added.

The settingÔÇôup of a Non Banking Financial Authority has been in the government’s top agenda for nearly four years sparked by huge assets which are in the hands of some non-regulated financial institutions.

Pension Funds have a swath of over P 31 billion which is handled by fund management companies while insurance companies are estimated to be managing around P 9 billion.

The authority is also expected to work on a rule-book of the micro lenders as well which are being roundedly accused of reapingÔÇôoff some desperate people of their hard earned money through their high interest rates.

“I think this is a good development because it will have an oversight on some organizations which were previously unregulated. I think this is long over due,” the Chief Executive Officer of Capital Securities, Gregory Matsake, said on Friday.

“This is not a new thing and such a regulatory system is long over due. It will be good for the industry, investors and the nation at large. Our business is based on trust and we are handling large sums of people’s money,” the managing Director of Motswedi Securities and long campaigner for the law, Martin Makgatlhe, said, adding that “otherwise our market would not grow substantially because some people think that it is not tightly regulated enough.”

According to the Government Gazette, the Non Banking Financial Institution Regulatory Authority ÔÇô equivalent to the UK’s Financial Services Authority ÔÇô is 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 rapid increase in assets that run into tens of billions under the management of the industry which is less regulated.

According to the plan, insurance companies, fund management outfits, stock exchange and collective investment undertakings will be put under scrutiny to avoid cases of conflict of interest and other financial crimes. The move will also enhance the status of Botswana registered companiesÔÇöespecially 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 institutions work along the 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, carry surprise checks on the conduct of the non bank financial institution and 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 than the damage caused by the company accused of breaching the convent rules. And also proposes automatic cancellation of the operating licence if the company is found to be in breach.

Other board members of the yet to be established non-banking financial authority include the central bank governor, Linah Mohohlo, Permanent Secretary in the Ministry of Finance, Serwalo Tumelo, Motor Vehicle Accident Fund board member, Christopher Greenland, Botswana Building Society’s internal audit manager, Mmatlala Dube, and Lilian Matenge- a private consultant.


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