Caleb M Fundanga: Consolidated supervision
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Joint MEFMI-FSI
Regional Seminar or on consolidated supervision, Lusaka, 19 October 2009.
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The Executive Director of MEFMI, Dr. Elias Ngalande
The FSI, Senior Financial Sector Specialist, Mr Amarendra Mohan
The Director, Financial Sector Management Programme of MEFMI, Mr Alphious Ncube
Distinguished Resource Persons,
Participants,
Ladies and Gentlemen
It is my honour and privilege to officiate at this regional seminar on Consolidated Supervision
jointly organised by the Financial Sector Management Programme of MEFMI and the
Financial Stability Institute of the Bank for International Settlements.
May I also take this opportunity to welcome and thank our distinguished resource persons,
for accepting invitations to come for this important seminar. It is my hope and trust that their
participation will enrich the deliberations of this seminar.
Before I delve into the intricacies of the seminar, I would like to applaud MEFMI, and the FSI
for consistently working together in the region to upgrade the banking supervisory skills. I am
reliably informed that at least once every two years, the two organisations organise a high
level seminar on a topical issue. It is therefore befitting for me to commend the two
institutions for the work well done.
Ladies and gentlemen, to some, it would not be a surprise to note that the seminar comes
shortly after the first anniversary of the collapse of Lehman Brothers, one of the first banks to
fail in a series of cascading defaults of major international banks, which precipitated the
onset of the current global financial crisis and the resultant worldwide economic recession.
The case of Lehman Brothers is just one of the many that highlights apparent weaknesses in
the global regulatory and supervisory environment.
To this end, market practitioners and academics are still analysing and discussing the
causes, prudential supervision frameworks, problem bank resolutions and strategies to avoid
future systemic challenges.
As the current global financial crisis has demonstrated, critical deficiencies still remain in risk
management systems. Areas in need of critical enhancements include identifying key risks
both within and across borders; assessing these risks, including stress testing and
macroprudential analysis to determine the impact on the financial system; monitoring, developing
coordination protocols, reviewing the regulatory frameworks, adopting appropriate risk
management frameworks and adopting international accounting standards.
While these structural deficiencies are not new, the current crisis has brought them to the
fore. The speed at which the crisis has spread across the globe indicates that the
development of coherent and rigorous frameworks for maintaining financial stability came too
late for several countries, leading to adhoc and inconsistent policy responses.
Ladies and gentlemen, over the years, we have witnessed a process of change that has
allowed many financial organisations worldwide to adopt more flexible structures whereby
they have established a wide range of subsidiaries and affiliates that are engaged in
business lines different from the core business of the parent financial institution. We have
seen banking activities, asset management or insurance activities that previously were
conducted on a stand-alone basis now being provided within one financial group. This trend
has steadily gained momentum in the Eastern and Southern African financial sector. Some of
these financial groups operate businesses across borders.
The main economic and financial benefit which encourages the formation of such groups is
the enhanced ability to achieve economies of scale and capture synergies across
complementary financial services business lines. These synergies result in improved
operational efficiency and effectiveness due to lower costs, reduced prices, and improved
innovation in products and services. At the same time the emergence of such groups has
brought complex linkages and relationships among economic agents. Consequently, they
have also necessitated a paradigm shift in supervisory approaches in order to identify,
manage and monitor risks.
It is evident in our various jurisdictions that current legislation and regulatory tools are not
adequate to effectively address the potential risks that threaten the safety and soundness of
our respective financial sectors posed by activities emanating from such financial groups.
Ladies and Gentlemen, I do not want to dwell much on what should be addressed by this
seminar. I am glad that MEFMI and the FSI are conducting this seminar on Consolidated
Supervision for the region at a time that our region is also exploring these topical issues. It is
my hope that this seminar will equip participants with relevant skills as senior examiners to
develop appropriate policies for their jurisdictions with respect to Consolidated Supervision
as well as prepare them for the daunting challenge of actually implementing Consolidated
Supervision in our various jurisdictions.
It is also my expectation that you will leave this forum after three days, with a new mindset
and a renewed commitment to practice what you will have learned so that you could
contribute to improving supervisory frameworks in our various countries. I trust that the
seminar will also provide you with an opportunity to network and establish durable and
valuable professional contacts within the region.
I wish to take this opportunity, on behalf of the MEFMI board and indeed on my own behalf,
to thank the FSI for their continued support to MEFMI activities over the years. As our
cooperating partners, they have always shown willingness to go an extra mile in providing
the necessary expertise that helps to sharpen our skills and groom the MEFMI Fellows on
gratis terms.
I have looked at the programme planned over the next three days. It has a comprehensive
list of topics, which I believe will enable you to broaden and deepen your knowledge and
skills. I have also been reliably informed that you will get information from seasoned financial
sector practitioners and supervisors who will provide you with valuable insights on the
subject of Consolidated Supervision and associated risk management processes.
Ladies and Gentlemen, allow me now to express my gratitude to the Federal Deposit
Insurance Corporation (FDIC), Central Bank of Nigeria, Reserve Bank of South Africa,
Reserve Bank of India, Standard Chartered Bank Zambia Plc and the Reserve Bank of
Zimbabwe for releasing officials from their institutions to come and participate in this
important seminar and share their experiences and expertise with us.
Chairperson, may I also take advantage of my position on the podium to ask you all to join
me in thanking them with a hand of applause. I wish to urge them to continue supporting
MEFMI as the capacity needs of the region are yet to be fully met.
To the participants, I urge you to fully participate in the discussions and use every
opportunity to tap from the vast experience and expertise represented here. Sustainable
capacity building in the region can only be achieved through sharing of ideas and
experiences on both international and regional perspectives.
Finally, I wish you all the best during your stay in Lusaka. I hope that you would make some
time to visit some of the beautiful spots that our city and country has to offer.
With these remarks, I now declare this workshop officially opened. I thank you.