taking and credit - only microfinance institutions respectively to allow for the expansion of microfinance in kenya. ladies and gentlemen ; the regulation and supervision of the microfinance sector is important as it is expected to lead to quality growth, broaden the funding base for deposit - taking mfis and initiate the process of integrating these institutions into the formal financial system. the regulation and supervision of the sector will enable central bank to define, and enforce, rules and procedures for mfis operations, entrance, exit, and ultimately create an environment for fair competition and efficiency in the sector. these rules will further aim to contribute to the stable and efficient performance of these institutions and protect clients ( in particular those making deposits ) against excessive risks that may arise from failure, fraud, or opportunistic behaviour. ladies and gentlemen ; to achieve the above, and in preparation to regulate and supervise the institutions that will be licensed under the microfinance act, the central bank is deeply involved in its capacity as well as the microfinance industry ’ s capacity, in collaboration with key microfinance stakeholders. the cost of regulation and supervision are not to be overlooked, for both the regulator and the soon - to be regulated microfinance institutions. research and development, infrastructure development, human resource capacity building for both cbk and the industry, and the development of appropriate performance standards and regulations for mfis are some of the activities that will need great financial input and technical assistance to develop. although there are cost implications for mfis, the outcomes, with regard to expansive outreach to majority kenyans and financial sustainability are benefits worth considering against the costs. the central bank, therefore, will seek to advance market discipline as a complementary layer to reducing the costs of regulation and supervision. in conclusion, ladies and gentlemen ; i am pleased to inform this forum that the central bank is not only committed to fostering the soundness, stability and integrity of the financial sector in kenya but also is also committed to fostering the development and growth of alternative financial service providers for the benefit of our people. microfinance is one subsector that the central bank is very keen to develop as a powerful tool for fighting poverty and increasing access to financial services and products to majority of kenyans. as a way forward, let me underscore the important role of the microfinance industry and the need for all microfinance industry players and key stakeholders to continue to promote close partnership and collaboration with the central bank

yandraduth googoolye : credit risk and market risk – the journey ahead opening and closing remarks by mr yandraduth googoolye, first deputy governor of the bank of mauritius, at the working session on “ credit risk and market risk – the journey ahead ” at the federation of indian chambers of commerce and industry and indian bank ’ s association conference on “ global banking : paradigm shift ” theme : “ navigating successfully in an uncertain world ” mumbai, 7 november 2008. * * * ladies and gentlemen it is a pleasure for me to chair this afternoon session on credit risk and market risk, a subject whose importance is gaining momentum among policymakers these days. economic theory tells us that credit risk and market risk are intrinsically related to each other and are not separable ( jarrow and turnbull : 2008 ). with financial innovation, the interaction between credit risk and market risk has itself become even more complex today. the recent financial crisis has indeed showed us how a credit risk event can trigger other market related and liquidity related risk events. the sub - prime crisis in the united states, which has its origin in protracted low interest rate policy, has shown us how our interest rates setting decisions impact on credit risk – a linkage that has been somehow neglected over recent times. as we coordinate our efforts to ease monetary conditions to curb the growing risk that our economies would dip into recession ; we need to be vigilant on the long term consequence of our decisions today, to avoid another financial turmoil in future. financial innovation has spurred the development of risk management tools but it has also brought together various other forms of risk into financial products, making the art of risk management even more sophisticated. the rapid growth of derivative instruments blurs the dividing line between the established concepts of credit risk and market risk. the trading of credit derivatives and other exotic securities has transformed credit risk into market risk. when the credit conflagration morphed into a fully - fledged panic in financial markets over the last few weeks, the major stock markets plunged. a decade or so ago, technological innovation produced securitized and other credit derivatives to help financial institutions to manage risks ( credit or liquidity ). those instruments quickly gained popularity among practitioners as they promised to transfer credit risk to those who were supposedly in a better position to bear those risks while contributing to financial stability. as these instruments grew in complexity, existing risks were transformed into other risks and new risks emerged. those risks were typically