preparing supervisory authority and pension industry for risk-based supervision
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Preparing Supervisory Authority and Pension Industry for Risk-based Supervision. Nzomo Mutuku Manager, Research & Development Retirement Benefits Authority, Kenya. Contents. Retirement Benefits Industry in Kenya Risk Based Supervision in RBA Kenya - PowerPoint PPT PresentationTRANSCRIPT
Preparing Supervisory Authority and Pension Industry for Risk-based
SupervisionNzomo Mutuku
Manager, Research & DevelopmentRetirement Benefits Authority, Kenya
Contents
• Retirement Benefits Industry in Kenya• Risk Based Supervision in RBA Kenya• Preparing the Supervisor and the Pensions
Industry• Challenges in Implementing Risk Based
Supervision Model in Kenya
State Old Age Pension on pilot program
Kenya Pension System
Kenya Pension Scheme Design
REGULATION MATRIX
Scheme Administrator
Scheme/Trustees
Others (Actuary, Auditor, Legal advisors, etc.)
Retirement Industry Assets
Note: Excluding NSSF
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10
KShs
millions
Other
Guaranteed Funds
Immovable Property
Offshore
Unquoted Equties
Quoted Equities
Government Securities
Fixed Income
Fixed Deposit
Cash
Retirement Industry Assets, %
Note: Excluding NSSF
4% 2% 4% 1% 1% 1% 1% 1% 13%16% 20%
21% 26% 27%11%11% 8%
23%29%
42% 45%50%
50% 41% 38% 36%36% 38%
79% 82% 81%
69%59%
46% 44%38% 34%
38% 40% 39% 35% 32%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jun 00
Jun 01
Jun 02
Jun 03
Jun 04
Jun 05
Jun 06
Jun 07
Jun 08
Dec 08
Jun 09
Dec 09
Jun 10
Dec 10
Other
Guaranteed Funds
Immovable Property
Offshore
Unquoted Equties
Quoted Equities
Government Securities
Fixed Income
Fixed Deposit
Cash
Regulatory Structure
RETIREMENT BENEFITS AUTHORITY (RBA)
• Regulate and supervise establishment and management of retirement benefits schemes.
• Protect the interest of members and sponsors of retirement benefits schemes.
• Promote the development of the retirement benefits industry.
• Advise the Minister for Finance on the national policy to be followed with regard
to the retirement benefits industry.
• Implement all government policies relating to the retirement benefits industry
Created in 2000 by an Act of Parliament
50 Staff
StatutoryObjectives
Why did RBA adopt RBS?
• Allows systematic assessment within a formalized framework both at the time of examination and in between through off-site monitoring
• Allows Identification of schemes and areas within schemes where problems exist or are likely to emerge
• Cost effective use of resources through greater emphasis on risk
• Enables prompt intervention and timely action• RBS allows supervisor to
• spend the minimal amount of effort on schemes in satisfactory status • concentrate on schemes requiring more attention
• Reduces regulatory burden• Continuous monitoring
FRAMEWORK DEVELOPMENT Preparing for RBS
2004 WB Institute facilitates training on Pension Supervision effectively introducing RBS
2005 Framework Introduction/ Consultation-Initial draft2006 OECD Consultant Promontory Financial Group Australasia,
reviews draft, recommended; • Legislative Changes to allow regulator issue Prudential Standards• Attachment of RBA Employees to Jurisdictions with operational RBS Model• RBA to Develop detailed manual and procedures for RBS
2007 Public Announcement to Industry on shift to RBSFinal report on RBS case study for Kenya
2008 RBA Staff undergo attachments in Australia, SA & UKRBA appoints consultant to facilitate Implementation of
RBS approach
FRAMEWORK DEVELOPMENT Preparing for RBS
2009 Consultant Trains staff on RBS modelConsultant submits final report including;
• Pre-requisites for RBS• Procedure Manual• Implementation Manual• Training Syllabus for staff and Industry
Law amended to require time weighted mark- to-market reporting of investment performance
MOU signed with other financial sector regulators to collaborate in different areas including RBS
2010 Law amended to give RBA powers to issue statutory guidelines
RBA commences RBS for pilot 60 schemes (5 % of Schemes). RBA Launches RBS Model to the Industry
FRAMEWORK DEVELOPMENT Preparing for RBS
2010 (cont)Issue of interrogatories to all schemes:
• Governance self-assessment• DC or DB interrogatoryPractice note on Income draw Statutory guidance note on risk based supervision2011
Training of scheme administrators commenced in March 2011• Introduction to the Concept of RBS• International experience of RBS in pensions• RBA model for RBS• Implementation Challenges
Preparing the Industry for RBS
• Early Public announcements• Amending laws to have powers to issue practice notes based
on supervisory approach adopted• Amending laws to ensure uniform reporting and
performance measurement to enable comparable risk scoring
• General Workshop for industry• Detailed Workshops for administrators • Issue of interrogatories to all schemes:
Implementation Challenges
• Change from compliance based approach to RBS requires change in mind-set in supervisor and industry
• Educating scheme trustees and service providers on the new system and enabling them to complete interrogatories satisfactorily and prepare their internal policies.
• Lack of appropriate data for a some schemes which makes it difficult to score them.
• Difficulty in identifying and financing a suitable IT system in line with the new system as well as challenge of shifting industry towards electronic filling of returns in suitable format.
Thank You
Asante
www.rba.go.ke