The Financial Stability Council and the four regulators in the financial services sector are developing a policy document that will make it mandatory for regulators in the industry to collaborate and share information among themselves.
The regulatory institutions are: The Bank of Ghana which regulates the financial intermediation industry; the Securities and Exchange Commission (SEC) which regulates the capital market; the National Insurance Commission (NIC) which regulates the insurance industry; and the National Pensions Regulatory Authority which regulates the private pensions industry.
The move is aimed at ensuring transparency and efficiency in the financial sector and prevent another possible crisis that hits the sector recently.
Speaking with the Goldstreet Business, Commissioner of Insurance of the NIC, Justice Yaw Ofori said the move to ensure all regulatory bodies share information among themselves has become urgent and that even before the document becomes operational, such institutional measures and framework are already ongoing.
“There were problems happening in one of the sectors and the other sectors didn’t know. If we were sharing information, we would have actually put in corrective measures and it couldn’t have gotten that far”, he noted this during the 10th Cedants’ Anniversary Awards organized by Ghana Reinsurance Company in Accra last Friday.
Importantly, since the nature of work in the four industries within the financial services sector interrelates with each other, basically any crisis that affects one sector directly or indirectly has negative impacts on the remaining sectors.
Addressing the gathering on the impact of standardization and supervision on Ghana’s financial sector, the Director-General of SEC, Rev. Daniel Ogbarmey Tetteh, who was the Guest Speaker noted that the increasing interconnectivity between the four major sectors in the financial industry has brought some systemic risks that ought to be dealt with collectively.
“The crisis in the financial sector underscored this interconnectivity. If you take the asset management segment of the securities industry, they have been impacted negatively in view that most of the asset managers executed their fixed income mandate by placing huge amount of money with some of the affected (financial intermediation) institutions.
“It is also conceivable that pension funds and probably some insurance premiums could also be impacted”, he stressed.
Consequently, the revocation of the licenses of the affected institutions has led to some impairment of the assets of some fund managers including investments made by both insurance and pensions management companies and this creates the imperative need for all regulatory bodies in the financial sector to work together.
Importantly, the reforms that have occurred in the sector recently have given rise to the debate as to whether to continue having separate regulatory bodies for each of the four industry segments – as what currently exists – or converge by migrating towards having a single overriding supervisory body just like what exists in the United Kingdom and South Africa where their respective central banks are charged with formulating and implementing monetary policy, but supervision of financial service providers lies with that single supervisory institution.