Financial services to get single regulatory agency

Government has mandated that the supervision of insurance companies and pension funds be integrated with that of banking institutions under the authority of the existing Bank Inspection Department of the Central Bank.

The legislation required to effect the transfer is presently in its final stages and is expected to be presented to Parliament by the month-end. This was revealed yesterday by Central Bank Governor, Ewart Williams, as he addressed members of the insurance industry at a seminar on the Central Bank and its preparations for integrated supervision. The seminar, which was organised by the Association of TT Insurance Companies (ATTIC), was held at the Hilton Trinidad. Williams noted that this Integrated Supervisory Project is, in principle, part of a larger strategy which is geared at reinforcing safety and soundness in the insurance industry, while at the same time, preparing the country’s financial system to play a pivotal role in the future development of the economy. “This broader financial sector strategy,” he explained, “involves, among other things, improving the regulatory framework of mutual funds and credit unions. “It is also focussed on strengthening the Securities and Exchange Commission and building an efficient capital market that will mobilise and channel savings into long term investment,” he noted.

The rationale behind the establishment of a single regulatory agency arose out of the increasing complexity of the financial services industry which was evidenced by the emergence of financial conglomerates. These conglomerates, Williams stated, require a strong institution to supervise them as a whole rather than a series of agencies. He went on to say that it was becoming more difficult to distinguish between the products and services offered by the insurance industry or by the securities industry and those offered by the traditional deposit- taking institutions. “Accordingly,” Williams maintained, “integrated supervision avoids the different regulatory treatments of similar products. It eliminates gaps in consumer protection and reduces the scope for regulatory arbiters,” he said. Williams went on to note that TT, like most developing countries, was experiencing an “unfortunate” shortage of human capital.

However, he said, it was hoped that the creation of a single regulatory agency would reduce the problem of spreading limited human resources among various specialised industries. “In addition to these reasons, the Central Bank sees integrated supervision as a way of facilitating the task of maintaining soundness in the financial system. We should learn from the Jamaican experience and seek to put our house in order,” he asserted. Additionally, the Central Bank intended to supplement domestic resources with senior level technical assistance from the office of the Superintendent of Financial Institutions of Canada. “We are also in the process of incorporating some staff of the Office of the Supervisor of Insurance of the Ministry of Finance into the Banking Inspection Department of the Central Bank,” he added.