njuguna ndung ’ u : east africa – focus on risk, corporate governance, anti - money laundering and other challenges remarks by prof njuguna ndung ’ u, governor of the central bank of kenya, at the east africa risk and governance summit, nairobi, 13 may 2014. * * * mr. pawan hegde, managing director – governance risk and compliance, thomson reuters ; mr. paul muthaura, acting chief executive officer ; capital markets authority ; distinguished participants ; ladies and gentlemen : i am privileged to be with you this morning for this landmark summit. let me first convey the best wishes of the cabinet secretary, the national treasury, mr. henry rotich who was supposed to deliver the opening keynote speech today. due to emerging exigencies, the cabinet secretary, the national treasury has asked me to represent him this morning. let me also thank the organisers of this conference thompson reuters and the capital markets authority ( cma ). indeed the issues to be discussed at this conference on regional regulatory trends, corporate governance, anti - money laundering, combatting the financing of terrorism and fraud are close to the hearts of governments across the east african region. it is also very apt that the focus is east africa. this also coincides with the regional review group for africa and middle east of the financial action task force ( fatf ) doing their onsite visit on kenya. ladies and gentlemen : the east african community ( eac ) heads of state in november 2013 signed the east african monetary union ( eamu ) protocol. eamu will work for more integration and convergence by 2014. eamu ’ s success will, to a large extent, be anchored on a seamless, efficient and effective integrated financial services market. to build this market, eac member states must elevate their supervisory and legal frameworks and embrace global supervisory and regulatory standards that converge. however, global standards must also be customised to cater for our unique east african terrain. the east african central banks are this week meeting here in nairobi under the auspices of the eac monetary affairs committee to discuss some of the key building blocks essential for integrated banking, payments and financial market systems. the central banks will later this week launch the east african payments systems ( eaps ). eaps initially connecting the real time gross settlement systems of the eac countries, this will facilitate cross border trade and investment across the eac countries. this summit comes at a time when it can offer

as apart from requiring banks to conform to international best practices on risk - based supervision under basel i and now basel ii, the bank of thailand also moved to strengthen our supervisory function, utilising both on - site and off - site supervision as well as asking banks to carry out stress tests on a regular basis. the key here was to strengthen banks ’ own risk management culture and system. works on strengthening the financial infrastructure were started and are still on - going. in this regard, various initiatives were introduced, including the long - term effort to reshape the financial system, and address inherent structural weaknesses, that was the mission of the financial sector master plan phase i. the establishment of the national credit bureau to improve credit information, and improvements in financial legislations, including the new financial institutions business act, the bank of thailand act and the deposit protection agency act. today, our banking sector fundamentals continue to be strong, serving as a dependable pillar for our economy. despite this advantage, the bank of thailand is not complacent and we will continue to prepare our banking sector for future challenges. in this regard, a swot analysis of our current financial institutions system reveals that while there was overall improvement in efficiency and soundness, operating costs remained high and financial access gaps remained. furthermore, there was still inadequate financial infrastructure to support risk management of financial institutions. meanwhile, future challenges of the next five years would likely come from more intensified competition – not only among banks, but from capital market, both local and overseas. it would also come from more complex and varied needs for financial services, as a result of globalizations and aging population, the shift in resource allocation with greater role of domestic demand vis - a - vis external demand as engine of growth, and finally, capital inflows and external challenges from the global economic crisis. taken together, these remaining areas of improvement and the need to tackle future challenges have led to the recent launch of the second phase of financial sector reform. this brings me to the second part of my talk : key strategies in the financial sector master plan phase 2. when thinking about characteristics that our future financial system is envisioned to have, several keywords come to mind : efficiency, strength and resiliency, diversification, fairness and transparency. with all of these keywords in mind, measures under the financial sector master plan phase 2 are grouped into three main pillars, aimed to tackle the following tasks : first, reducing system - wide operating costs,