njuguna ndung ’ u : next generation risk management speaking notes by prof njuguna ndung ’ u, governor of the central bank of kenya, thomson reuters risk management forum “ next generation risk management ”, nairobi, 23 july 2009. * * * distinguished guests ; ladies and gentlemen : it is my distinct pleasure to be joining you this evening at this important forum. i would therefore wish to express my gratitude to thomson reuters, the convenors of this event for the invitation. the timing of the forum is apt in view of the prominence that risk management has gained in financial circles over the last few years. the global financial crisis has only served to underscore the importance of scaling up risk management practices and appropriate pricing of risk to counter dynamics in the global financial markets. i am therefore pleased to see a diverse gathering of financial sector players this evening. thomson reuters also brings a vast repertoire of international experience on risk management that we are keen to draw upon. whereas risk management has been prominent on the radar of financial institutions and markets, the global financial crisis has unearthed serious shortcomings in risk management practices. and furthermore, coming from the centre, this has been disastrous. one of the cardinal causes of the crisis is now widely agreed to be deficiencies in risk assessment and pricing of complex products. these complex products were indeed at the heart of the crisis. markets failed to price these products appropriately and deficiencies in the regulatory architecture precipitated excessive risk taking. it is imperative that market players and regulators reflect on reviewing risk management practices. i am therefore confident that the local experiences to be shared tonight and the international experiences to be gleaned will only serve to enrich this discourse. the central bank, can share the perspectives on risk management from a regulator ’ s viewpoint. the central bank of kenya has over the last five years promoted the inculcation of a risk management culture in the kenyan banking sector. the central bank has also adopted a risk - based supervisory approach. this approach is premised on the overarching objective of proactively addressing threats to financial sector stability. maintaining the stability of the banking sector is indeed one of the core mandates of the central bank. i am pleased to note that the banking sector has, to a reasonable extent, embraced risk management. this is perhaps one of the key reasons behind the relative stability of the kenyan banking sector in the recent past inspite of local and global turbulences. however challenges remain as the kenyan

njuguna ndung ’ u : regulation and supervision of the forex bureau industry in kenya talking notes of prof njuguna ndung ’ u, governor of the central bank of kenya, for the meeting with the kenya forex bureaus association ( kfba ), nairobi, 22 august 2007. * * * the chairman, kfba ; distinguished guests ; ladies and gentlemen ; 1. let me take this opportunity to invite you all to the cbk during this very important occasion to meet the forex bureau industry representatives as part of our partnership and to discuss and share experiences on industry matters. 2. before i proceed, let me thank the association for honouring our invitation and my staff for the presentation, which has clearly laid down the industry landscape and set the stage for our meeting. i hope this does form a platform through which we share experiences as well as challenges. 3. ladies and gentlemen, first and foremost, let me emphasize the role of regulation and supervision of the forex bureaus in kenya, which aims to : • develop a strong, stable and viable forex bureau industry ; • inculcate good corporate governance practices in forex bureaus ; • ensure there is adequate internal control and management information systems in forex bureaus ; and • ensure forex bureaus to comply with the act and guidelines. all these factors enhance healthy developments for any firm in business. but since bureaus are special, we shall continue to attach a lot of importance to compliance and enforce the act and guidelines including suspension and revocation of licences. 4. however, we expect forex bureaus to cooperate and partner with the central bank in the development of the forex bureau industry. 5. let me now turn to specific matters that touches on certain specific issues on the industry. these include : a ) moratorium : as you are aware, the central bank had in the past imposed a moratorium on licensing new forex bureaus. this was done in order to : • allow newly established forex bureau industry to grow and individual bureaus to consolidate • ensure market discipline in the foreign exchange market by developing appropriate frameworks for regulation and supervision ; and • enforce government concerns on money laundering and related financial crimes. after a careful assessment, the central bank has lifted the moratorium on licensing of new forex bureaus including those to be located in the nairobi and mombasa central business districts. b ) industry image : the continued existence of the moratorium can