njuguna ndung ’ u : ongoing developments in the kenyan financial sector remarks by prof njuguna ndung ’ u, governor of the central bank of kenya, at the kenya institute of bankers national banking & finance conference, mombasa, 3 july 2012. * * * hon. robinson njeru githae, minister for finance ; hon. kenneth marende, speaker of the national assembly ; hon. justice willy mutunga, chief justice of the republic of kenya ; hon. prof. githu muigai, attorney general of the republic of kenya ; mr. richard etemesi, chairman, kenya bankers association ; mr. john waka, chairman, kenya institute of bankers ; chief executives of financial sector regulators here present ; distinguished guests ; ladies and gentlemen : i am delighted to join you this morning at the onset of this landmark conference. at the outset, i would like to thank the kenya institute of bankers for inviting me to this forum. i also applaud all those who participated in organising this conference for their commendable efforts. ladies and gentlemen : my task this morning is to invite the minister for finance to deliver his keynote address to this gathering and also officially open the forum. but before i do so, allow me to make some few remarks on the ongoing developments in the financial sector. over the last five years, the kenyan financial sector has witnessed significant transformational developments. the kenya institute of bankers has been on the driver ’ s seat to spearhead these developments. let me highlight a few of these developments : the growth of technologically enabled financial services, especially through the inter - linkage of mobile phone technology platforms and banking technology platforms ; increased regional and international expansion and connectivity of financial service players as well as increased market potential to the region ; increased market awareness of customer rights and the resultant emphasis on consumer protection ; and strengthening of oversight mechanisms to protect the integrity of financial systems. the operationalisation of the national payment systems act and the financial reporting centre amongst others will strengthen the integrity and stability of the financial system ; ladies and gentlemen : these developments present not only opportunities but also significant challenges. to be able to exploit the resultant opportunities and surmount the challenges, there is need to enhance the skills and competence of our human resources. it is therefore imperative that the kenya institute of bankers and other capacity building institutions continuously interact with the market for their programmes to remain relevant. ladies and gentlemen : kenyan banks have taken the lead in positioning themselves

this component of business costs, would result in a subsequent increase in headline inflation. however, this risk is more evident in emerging countries than in developed ones, where the weight of food products in cpi is lower. in latin america, inflation will remain the dominant theme and the risks on this front will remain skewed to the upside. in argentina the monetary and financial regime has faced the most significant challenge since the crisis of 2001 - 2002, but when we look at the results it is clear that we definitely managed to rise to it. for the first time in decades regardless of external and domestic disruptions, as the ones seen in the last days, the central bank is providing monetary and financial stability, two essential public goods for sustainable development. we know that the country has a long history of macroeconomic instability. monetary regimes have unsuccessfully shifted from one extreme to the other. therefore, in an economy with precedents such as confiscation of deposits ( 1989, 2001 ), hyperinflation ( 1989, 1990 ), megadevaluations ( 1989, 1990, 1991, 2002 ), and a default on the public debt ( 2001 ), the monetary system cannot set itself an exclusive goal, ignoring the economy ’ s idiosyncrasy and vulnerabilities. to achieve long - term monetary and financial stability, this historical evolution needs to be taken into account. hence, the central bank must have an “ across the cycle ” view rather than a short - term one. our country is still going through a transition phase typical of post - crisis periods. and these transition stages – where key macroeconomic variables converge to their long - term values – take time and raise enormous challenges. the chilean case shows that it takes time to become a normal country. unlike the cases of brazil, mexico or southeast asia, the abandonment of the convertibility regime included simultaneously an institutional breakdown, a huge devaluation, the destruction of the financial system and the default on the public debt. there are several examples of the normalization phase that is still taking place : monetary transmission channels are just being rebuilt, since credit to the private sector accounts for only 12 percent of the economy ; far below the latin american average. the experience of other emerging economies shows that consistency and gradualism in both policy design and implementation are the adequate approach during this phase. therefore, patiently rebuilding the power of monetary policy is a key step towards stability. it is then clear that the argentine economy is simply at a different