NBFIRA

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Mandate

NBFIRA is mandated by Section 5 of the NBFIRA Act, 2023 to regulate and supervise Non-Bank Financial Institutions with a goal contributing to the stability of the financial system

Regulation

Establishment of rules or principles that seeks to affect or control the behavior of entities in order to achieve a desired outcome.

  • Rule Based Regulation
  • Elaborated through: Policies, Legislation, Rules, Guidelines, Directives ( Regulatory Framework)
  • Principle based Regulation
Financial Supervision

Monitoring regulated entities to ensure that they adhere to the standards established in the regulatory Framework.

  • Elaborated in the supervisory Framework: Supervisory tools.

Who is regulated & supervised?

NBFIRA only regulates Non-Bank Financial Institutions (NBFIs)

  • NBFIs defined in the NBFIRA Act ( definition of NBFI);
  • Multisectoral Regulator ( Pension, Securities, Insurance, Lending)
  • Limit Regulatory Arbitrage (Flexibility is required in the defining the scope to accommodate market developments)

Functions of NBFIRA

Regulation

Issuing of Rules, Directives and Guidelines etc.

Authorization

Gate keeping role; Licensing Criteria, Fit and Proper Criteria

Supervision

Safe and soundness, Conduct of Business

Surveillance

Monitoring Vulnerabilities and non-sustainability trends

Enforcement

Taking action against noncomplying entities

Resolution

Resolving Non- Viable entities in a manner that protects consumer interest

Consumer Education

To ensure consumer understanding

Advisory Services

Advisor to Government on issues relating to NBFIs

Objectives

The principal objective on NBFIRA is to regulate and supervise the non-bank financial institutions so as to foster the:

Safety and soundness of non-bank financial institutions
Highest standard of conduct of business by non-bank financial institutions
Fairness, efficiency and orderliness of the non-bank financial sector
Stability of the financial system
Reduction and deterrence of financial crime

Guiding Principles

  • Risk Focused
  • Proportionality
  • Consistency
  • Integrated and Consolidated Supervision
  • Observing International Standards
  • Seek to Reduce the risk rather than prevent failure
  • Division of Responsibilities

Branches of Regulation

Market Conduct Regulation

Focus is on consumer protection

  • Fair treatment of customer
  • Customers right to information ( disclosure requirements)
  • Prevent abusive business practices etc.
Prudential Regulation

Focus is on the safety and Soundness of regulated entities and the broader financial system stability

  • Capital (Solvency) requirements
  • Liquidity Requirements