gave rise to a significant appreciation of real exchange rates and a rapid expansion of credit, including through the shadow banking system, in many emes, thus increasing their vulnerability. second, the “ taper tantrum ” episode of 2013 provides further evidence on the significance that spillovers from shifts in monetary policy in the advanced economies, even when they are only perceived and do not actually occur, can have on emerging markets. expectations of an unwinding of the unconventional monetary policy implemented in the united states led to a strong market reaction during that period. consequently, financial volatility rose sharply and capital flows to emes fell, leading to pressures on the exchange rates and asset prices in these economies, increased external risk premia, and in general a severe tightening of financial conditions. some authors have stressed the significance of financial market turmoil during may - august 2013, despite the relatively small decrease in capital flows to emes ( about 1 % of gdp ). 4 it is of course natural to ask to what extent the above experiences are applicable to the current situation. in other words, is the normalization of monetary policy in the us likely to have a major impact on emes? here we have divergent views. on the one hand, there are those who believe that the outlook for emerging market economies is not as gloomy as it seems : • the upcoming tightening cycle will most likely take place within the context of a firmly established recovery in the united states, which is a scenario that has seen emerging market economies thrive in the past. as a reference, some estimates point out that, over the year following the beginning of the last three tightening cycles in the united states, industrial production in emerging markets grew between 7. 5 % and 10 %, while export volumes did so by some 10 % to 15 %. 5 all in all, the argument see sahay, r. et al. ( 2014 ) : “ emerging market volatility : lessons from the taper tantrum ”, imf staff discussion note no. 14 / 09, september. see dahlhaus, t. and g. vasishtha ( 2014 ) : “ the impact of u. s. monetary policy normalization on capital flows to emerging - market economies ”, bank of canada working paper 2014 – 53, december. see musalem, alberto g. ( 2015 ) : “ us macroeconomic and regulatory developments and emerging market economies ”, speech at the international financial conference annual meeting, cartagena, colombia, 9

collateral process, central bank, kenya bankers association ( kba ) and financial sector deepening ( fsd ) kenya commissioned a study aimed at reviewing the cost associated with collateral in the credit granting process. the study brought forward some invaluable insights on the intricacies surrounding the collateral process and recommendations which when implemented will result in both cost and time reduction. provision of long - term finance : a small committee to look into development banking products was formed in february 2010 to explore avenues through which development banking products, also referred to as “ long - term financing products ”, can be introduced into the market. this was necessitated by several reasons, among them ; the commercial banks credit market structure that focuses more on short term loan maturities ; the moribund development financial institutions ; the opening opportunities with flow of international funds that are intermediated by local institutions ; and the need to develop the bonds market. the basic question : how can we lengthen the maturity profile of term loans to 5 – 10 years for smes? interactions with market players : since september 2009, the mpc has been holding regular meetings with the chief executive officers of commercial banks to brief them on the background to its decisions in the bi - monthly meetings. the meetings are part of a wider strategy to enhance the transmission of monetary policy decisions to the real sector through feedback, sensitization of the market on the activities of the mpc, as well as engaging banks on the need to lower the cost of credit in order to support economic growth. 5. on the market front, the central bank of kenya, the capital markets authority and the nairobi stock exchange undertook significant reforms in the domestic bond market. these reforms included introduction of an automated trading system aimed at enhancing the safety and efficiency in the processing of secondary trading of government securities as well as corporate bonds in the market. the move is also expected to improve market liquidity thereby encouraging more investors to participate in the bond market. this development fits in very well with the aspirations of the capital markets development as envisaged in vision 2030. 6. we have accomplished much since we last met, but a lot more remains to be done to expand the depth and breadth of the financial sector. i am sure that together as the financial sector regulators we shall seek the necessary synergies to foster a safe, sound, efficient and inclusive financial system. but more demands as the eac monetary union shapes up will be coming to us. 7. being cognisant of the onerous