Multiple Legal and Regulatory Framework in the Banking and Financial Sector in Kenya: Addressing Resultant Complexities,disharmony and Conflicts in Policy Goals

Abstract

Financial services play a catalytic role in the efficient allocation of productive resources and in the economic development of third world countries. This study focuses on Kenya’s financial regulatory framework, which has continually grown. The financial sector is critically important in any economy if supported by sound laws and regulatory regime which is effective to protect consumers and adequately control market abuses, however, the sector is today marred by a lot of regulatory inefficiencies as well as emerging trends, which are also witnessed globally. These challenges have resulted into appeal for reform of the regulatory framework, in order to enhance its supervision. This study looks at the rationale for regulation, the different models of regulation in the financial services and what they are aimed to achieve. The research narrows on unified theory of financial service regulation, which has greatly been recommended to be adopted for the Kenyan financial regulatory framework. It further interrogates the efficacy of the existing regulatory framework, and conducts a comparative study of the regulatory models in the United Kingdom and South Africa. The insights obtained from the analysis will then lead to the conclusion and recommendations for the most viable regulatory framework for the financial services in Kenya. The study establishes that there is no optimal model of regulation and every jurisdiction must adopt a framework that best suits its intended objectives and thus postulates that the proposed unified Financial Services Council is the most viable model to be adopted for Kenya’s regulatory framework. However the same must be structured taking into account the existing challenges and the intended objectives.