The Namibia Financial Institutions’ Supervisory Authority (Namfisa) intends to create new laws as the current ones in place are outdated and not applicable to the current financial market it is supposed to govern.
The current laws, which are from the post-independence era, are fragmented and inconsistent in terms of how to deal with cases falling within their circle. In addition, the laws exacerbate the costs of regulation.
Namfisa thus aims to guide the legislation in a modernised and flexible regulatory framework which deals with how the current financial economy has evolved.
The revamped laws will also seek to give boards of directors more authority to make decisions which influence the financial entity they are supposed to oversee.
The laws have already been drafted, and are currently with both the Ministries of Justice and Finance for finalization before they are presented to Cabinet this year.
Namfisa’ Corporate Communications Manager Isack Hamata told The Villager that the regulator currently uses 13 fragmented and outdated laws.
“Specifically, the laws do not allow the regulator to reap the benefits of economies of scale as they do not provide for consistent processes and methods to be employed in the regulation and supervision of financial institutions and intermediaries,” he stressed.
The new laws are expected to be ‘omnibus’ laws which are predictable and responsive to the needs of present-day socio economic conditions and once they are enacted, the Namfisa Bill will replace the current Namfisa Act.
In addition, when the Financial Institutions and Markets (FIM) and Namfisa Bills are promulgated, they will re-establish Namfisa and bring changes to the basic duties and functions of the authority.
Hamata said it will also change the way financial institutions are regulated, and Namfisa will then have expanded responsibilities as a statutory body and as regulator, and create a governance structure which will address deficiencies identified.
“The FIM Bill also introduces subordinate legislation, like prudential and market conduct standards and regulations. Another piece of legislation being drafted is the Financial Services’ Adjudicator (FSA) Bill, which will create a complaints’ adjudicator for the entire financial sector in Namibia”, he noted.
Once the FSA is established by an Act of Parliament, it will provide a framework for formal complaints’ resolution and consumer protection.
The FSA Act will establish the Office of the Financial Adjudicator, whose main purpose will be to consider complaints received from the public against financial services’ providers, and to make decisions in respect of such complaints.
The decisions of the Financial Adjudicator will carry the same weight as orders made by the High Court of Namibia.
“You will, therefore, not have to fork out money to pay a private legal practitioner to represent you, which in itself is a huge benefit. This is one of the areas where the levies paid by an insurer to Namfisa benefits the consumer”, Hamata added.
When the FSA Bill becomes law, it will also allow for appeals against any decision of the Financial Adjudicator to be directed to the High Court of Namibia.
“The Act also empowers the Financial Adjudicator to make appropriate cost orders against financial services’ providers or any complainant whose conduct during the investigation and determination of the complaint was improper or unreasonable, and whose actions caused any unreasonable delays in the finalization of the complaint”, Hamata stated.
Similarly, the Micro-lending Bill, once promulgated, will establish a sound regulatory and supervisory framework in order to effectively regulate and supervise the micro-lending industry. Currently, the Exemption Notice is not a sound and effective framework.
“Taken together, these new laws are intended to give the regulator strong enforcement powers against institutions in contravention thereof, and to further provide a new legislative basis for the institution to deploy its limited resources towards the most vulnerable areas in the financial system”, he continued.
In the same vein, Namfisa is moving towards a Risk-Based Supervision (RBS) system to focus its supervisory attention on the entities which may pose the greatest risk to the safety and soundness of the financial system.
RBS relates to both policy and the implementation of the whole approach to supervising financial institutions.
At the policy level, the emphasis is put on financial institutions’ boards and senior management’s responsibility for managing risks in their institutions and keeping adequate capital to absorb any losses which may arise.
However, at the implementation level, supervisory activities are prioritized and resources allocated according to perceived risks, like supervisory resources being first allocated to areas where risk is the greatest. The supervisory approach is also focused on evaluating the adequacy of financial institutions’ risk management systems.
“RBS is thus a supervisory approach which is designed to identify activities and practices of greater risk to the soundness of financial institutions, and accordingly deploying supervisory resources towards the assessment of how those risks are being managed by financial institutions. That is the reason why NAMFISA is gearing for an RBS approach to supervision”, Hamata noted.