OFFICIAL LAUNCH OF THE FINANCIAL STABILITY COUNCIL AND
SIGNING OF THE MEMORANDUM OF UNDERSTANDING
Opening Remarks
by
Moses D Pelaelo
Governor, Bank of Botswana
February 26, 2019
Good morning and welcome to the Signing Ceremony for
launch of the Financial Stability Council.
Ladies and gentlemen, as I look back, the launch is the
culmination of several significant steps and consultations.
Among these are: first, the initial assessment by the Bank
of the need and prospective role of a Financial Stability
Council, articulated in the 2018 Monetary Policy
Statement; second, consultations by officials within the
auspices of the Bank of Botswana/Ministry of Finance and
Economic Development Working Group, and also
involving the Non-Bank Financial Institutions Regulatory
Authority and the Financial Intelligence Agency; third,
approval for establishment of the Council by the
Honourable Minister of Finance and Economic
Development obtained in April 2018; and fourth an
inaugural meeting to consider an outline of the
Macroprudential Policy Framework and review of the draft
Memorandum of Understanding in September 2018.
The Financial Stability Council comprises the leadership of
the Ministry of Finance and Economic Development
(MFED), the Bank of Botswana (the Bank), Non-Bank
Financial Institutions Regulatory Authority (NBFIRA), and
Financial Intelligence Agency (FIA), institutions that are
involved in developing legislation and regulations,
policymaking and supervision with respect to the whole or
facets of the financial sector. It is acknowledged that the
respective institutions have unique statutory mandates,
objectives, oversight frameworks and operational spheres,
albeit mostly related. In this regard, the Financial Stability
Council is not established to usurp or dilute the role of the
respective institutions, which is neither feasible nor
desirable. Rather it is to share information and where,
desirable, facilitate collective and coordinated approach to
financial sector monitoring frameworks and crisis
resolution.
Ladies and gentlemen, to reiterate, as indicated in the
2018 Monetary Policy Statement, coordinated oversight is
necessary because while the relevant institutions are
distinctly and individually supervised at a micro level, the
financial system encompasses interconnected
relationships and activities and is subject to common and
transferable risks. Therefore, the Council is designed to
foster collaboration and coordination in the four areas of:
sharing of data and information for purposes of
monitoring and risk assessment; overseeing and guiding
macro-prudential policy framework and implementation;
regular briefings, consultations and policy review with
respect to relevant developments; and structured and
coordinated response to any financial system imbalances
and resolution as may be necessary.
Today's signing of the Memorandum of Understanding by
the respective institutions, therefore, represents an
undertaking to collectively safeguard the continuing
soundness and integrity of the financial system. Moreover,
going forward, it also facilitates the development of
mechanisms and channels for sharing of data and
consultation. The thought process for establishment of a
Financial Stability Council also involves consideration of a
robust legislative backing for the work of the Council and
this will accordingly be facilitated in the revised Bank of
Botswana Act; consultations between the Bank and MFED
on the review are at an advanced stage.
Colleagues, before concluding let me highlight the more
urgent work programme for the Council in the short to
medium term. First, is publication of the Financial Stability
Report, as an anchor publication, providing accountability
in the areas of assessment of financial stability risks and
mitigation measures. Second is agreement on a
Macroprudential Policy Framework that is relevant for
Botswana, in terms of risk mitigation, as well as
recognising the gaps in financial inclusion and
development.
Third, there is a specific need to address the challenges
arising from implementation of the Anti-Money
Laundering and Combatting the Financing of Terrorism
protocols and requirements. Fourth and related, thereto, is
the requirement to decisively address the incipient
misconduct and governance challenges in the financial
sector, deriving from greed and/or misunderstanding or
incompetence with respect to fiduciary responsibilities, as
well as opportunistic crime and fraud. Fifth, consultation
during 2019 will also involve consideration of a deposit
protection scheme for the country, to guarantee access to
deposits up to a specified threshold, in the event of bank
failure. Lastly, cooperation and collaboration among the
Council members would be critical in the timely update
and renewal of legislation and policies to retain and
improve effectiveness of supervision, monitoring and
guidance for the financial sector.
I thank you for your attention and I now call upon Council
members to comment, before we proceed to sign the
MoU.