A Huge Step Forward, But Can Regulators Cope?

Listen to our webinar on the Basel Committee’s guidance on financial inclusion regulation

> Posted by Center Staff

For the first time ever, the Basel Committee has issued draft guidance on financial inclusion, and invited comment. This guidance has the potential to influence the actions of banking supervisors across the globe. Today, the Center for Financial Inclusion held a webinar to explore this guidance. The webinar featured analysis by Dr. Daniel Schydlowsky, the former Superintendent of Banks in Peru, along with commentary from Dr. Njuguna Ndung’u, the former Governor of the Central Bank of Kenya, and Juan Carlos Izaguirre, a CGAP representative member of the drafting team for the Basel Committee.

[youtube https://www.youtube.com/watch?v=J5yfRI5S0BU&w=560&h=315]

The draft guidance report, formally titled “Guidance on the application of the core principles for effective banking supervision to the regulation and supervision of institutions relevant to financial inclusion”, builds on the Committee’s Core Principles for Effective Banking Supervision. While the committee began working on financial inclusion in 2008, the report is the first major output from the Basel Consultative Group’s Workstream on Financial Inclusion, which was launched in 2012.

In his analysis of the report, Daniel Schydlowsky identified a variety of burdens that supervisors may face while implementing the framework. The challenges of supervising new players using new technologies threatens to overwhelm supervisory capacities, particularly in smaller and least developed countries.

In their comments, all of the panelists zeroed-in on digital finance and financial technology as a crucial (currently lacking) element in the report. Schydlowsky stated: “It is important for supervisors to bring about digital finance as soon as possible. The benefits of using cellphones for banking are enormous, they increase productivity and efficiency. The quicker we can realize this potential the sooner we are going to have a more inclusive financial system.” Schydlowsky encouraged the committee to move beyond today’s snapshot and point the guidelines to a dynamic and evolving future. Ndung’u cited his experience in Kenya to show how regulators can test innovations – taking on risks in a controlled manner. Izaguirre provided insight into the internal conversations of the team in coming to terms with these questions.

For more from the distinguished panelists, we encourage you to listen to the webinar in its entirety above, or on CFI’s YouTube, here. You can also browse the webinar’s PowerPoint presentation slides, here.

The Basel Committee is accepting comments on the draft report. If you have comments on the guidelines or on what was discussed during the webinar, feel free to share them with us – here on the blog or via email by March 18th. The CFI is developing a response that it will share with the Basil Committee. You can also share your thoughts directly with the Committee until March 31st, here.

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