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SEACEN-BIS High Level Seminar

SEACEN-BIS High Level Seminar. Session 3: Global Trends in Financial Inclusion – Role of Regulators Comments on Remarks of Mr. Norbert Mumba Deputy Executive Director The Alliance for Financial Inclusion Port Moresby, Papua New Guinea 2 October 2015. Discussant: Michael J. Zamorski

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SEACEN-BIS High Level Seminar

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  1. SEACEN-BIS High Level Seminar Session 3: Global Trends in Financial Inclusion – Role of Regulators Comments on Remarks of Mr. Norbert Mumba Deputy Executive Director The Alliance for Financial Inclusion Port Moresby, Papua New Guinea 2 October 2015 Discussant: Michael J. Zamorski Adviser, Financial Stability and Supervision

  2. Regulatory Considerations in Financial Inclusion • Incentives • Statutory and regulatory powers and enforcement mechanisms • Proportionality • Consumer protection • Financial literacy

  3. Incentives • Licensing criteria for proposed new banks contain a statutory obligation to offer bank services and meet the sound credit needs of the local community(ies) in which they operate, including low and moderate income areas. Applicants required to articulate how they will meet this obligation on an ongoing basis. Approvals may be subject to related continuing conditions. • Periodic regulatory/public reporting of their record in fulfilling this obligation. • Regulators required to assess bank performance in deciding on permissions applications such as mergers, changes of control, acquisitions, branching and granting of additional powers.

  4. Statutory Requirements for New Banks and Permissions Applications • Financial history and condition • Adequacy of the capital structure • General character of the management • Consistency of corporate powers • Future earnings prospects • Convenience and needs of the community(ies) to be served

  5. Proportionality – Microfinance Example “…traditional bank supervision applies standardized procedures and focuses on individual transactions and the adequacy of loan collateral. Banking regulations do not prohibit the granting of small clean loans. However, in practice there has been a regulatory bias against the granting by banks of loans with insufficient collateral or without any form of security or collateral…there is a risk that examiners will criticize banks making such loans.” “Financial Inclusion, Education in the Philippines,” Gilberto M. Llanto, ADBI Working Paper Series, No. 541, August 2015.

  6. Basel Committee and Financial Inclusion • Basel Consultative Group conducted “Range of Practice Survey” late 2013 to capture current regulatory and supervisory approaches towards financial activities that are relevant to financial inclusion • Survey results presented in January 2015 BCBS paper entitled “Range of practice in the regulation and supervision of institutions relevant to financial inclusion” • Discusses how practices relate to Basel Core Principles

  7. Innovations in Digital Financial Inclusion “Banks and non-banks are developing new, cost-effective digital ways of serving poor and low-income customers who are often difficult to reach through traditional means (e.g. bank branches). The new digital means involve the use of access devices and channels (e.g. mobile phones, payment cards, point-of-sale terminals) and retail agents that accept cash from customers.” BCBS (2015)

  8. Financial Literacy/Financial Education • Help consumers to make informed financial decisions and choices, including spending, saving and borrowing • Various regulatory financial literacy programs exist that can be benchmarked in formulating a program contextualized to a jurisdiction’s circumstances • “Early intervention” - e.g., include programs in school curriculums

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