emmanuel tumusiime - mutebile : challenges for sound banking systems in east africa – a central banker ’ s perspective opening remarks by mr emmanuel tumusiime - mutebile, governor of the bank of uganda, at the 16th east african community ( eac ) monetary affairs committee meeting, kampala, 23 may 2013. * * * governors of eac central banks secretary general of the eac senior staff and technical officials ladies and gentlemen good morning it is with great pleasure that i welcome you to kampala for the 16th meeting of the east african community monetary affairs committee ( mac ). it is also an honour for me to host this meeting. the purpose of the meeting is to assess the status of implementation of previous mac decisions, and to consider any salient issues that may have emerged since our last meeting a year ago here in kampala. as is usual at the mac meeting, the format will involve the presentation of a report of the technical officials of our five central banks, followed by a discussion of the issues raised in the report. the technical report will be presented by the current chairman of the technical officials, dr adam mugume, of the bank of uganda. our technical staff has worked extremely hard over the last three days to produce a very comprehensive and analytically rigorous report. i would like to thank them all for the very good job that they have done. fellow governors, you have already received a brief on the issues in the technical report from your own technical officials this morning. without wishing to pre - empt the discussions, i would like to highlight briefly the following issues which i think merit particular attention today. first, financial stability is becoming an increasingly important area of responsibility for central banks in east africa as elsewhere in the world. for the eac, several trends in recent years have the potential to heighten vulnerability to financial instability. these trends include, inter alia, the rapid growth in the volume of short term portfolio capital flows, attracted often by favourable interest rate differentials. these capital flows are intermediated through our banking systems and could potentially expose banks to both liquidity and market risk. the volatility of these capital flows, which is often caused by events in the global financial markets, sometimes leads to highly disruptive movements in nominal exchange rates which policymakers cannot ignore. the importance of regional and international banks in our economies also poses risks unless we can put in place effective systems of consolidated supervision and mechanisms for resolving cross border banks in the event of

njuguna ndung ’ u : economic and financial developments in kenya speech by prof njuguna ndung ’ u, governor of the central bank of kenya, at the luncheon with members of the eastern africa association, nairobi, 21 january 2009. * * * the chairman eastern africa association, members, distinguished guests, ladies and gentlemen ; let me first thank the chairman of the association for this opportunity to share my experiences with economic performance, the conduct of monetary policy in 2008, and the perspective for 2009. the experiences of the central bank have been vast but i will deal with economic performance and policy directions in three topical areas : • the conduct of monetary policy and monetary policy decisions • economic growth outlook • the global financial crisis and kenya ’ s economic performance a. the conduct of monetary policy in 2008 the past year has been a difficult one both from a local and global perspective. for monetary policy at the central bank of kenya ( cbk ), three challenges emerged ; • liquidity management in the economy ; • inflation upsurge ; and • exchange rate volatility these challenges tended to take monetary policy management to unfamiliar territory. in order to ensure price stability or fight inflation, the cbk relies on indirect instruments that affect liquidity in the economy and so the stock of money, which in turn affects interest rates and prices in the desired direction. the debate on what are the targets and what instruments to achieve the targets is relevant. money supply growth was maintained within the target range for most of the months in 2008. ( i ) liquidity management in the economy the role of a modern central bank is in general price stability, that is to fight inflation. however, for the central bank of kenya, stability of the financial system is equally important, so is the national payments and settlement system. the bank implemented the first two objectives with varying degrees of success. while inflation was high we also faced downside risks to financial stability from the safaricom ipo. the size and nature of the ipo led to large shifts in liquidity, and the unwinding process would no doubt have had longer term impacts on economic and financial variables if not properly managed. the offer attracted ksh231 billion. liquidity was skewed in favour of a consortium of banks despite the mitigation mechanisms put in place by the banking system. the bank ’ s approach to this therefore was to mop up excess liquidity from the banking sector using the term auction deposit and repos