Board of Directors and Board of Trustees
Stakeholder Engagement Session
By: Kenneth Simataa Matomola
Chief Executive Officer
01 June 2017
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CONTENT
• Introduction
• Regulatory Scope
• Regulatory Framework / Challenges
• Regulatory Reform
• Supervision and Inspection
•
Regulatory Reform Agenda
• Conclusion
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Introduction / Establishment
NAMFISA was established by an Act of parliament, NAMFISA Act 3 of
2001 with the objective to:
 exercise supervision over the business of financial institutions and
financial services;
 Advise the Minister of Finance on matters related to financial
institutions and services;
 Enforce Compliance with Financial Intelligence Act
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TEAM / Supervisory Heads
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Current Regulatory ambit / Regulatory Scope
Long-term
Insurance
Micro
Lenders
(Usury)
Short-term
Insurance
Participation
Bonds
Medical Aid
Funds
NAMFISA
Stock
Exchange
Pension
Funds
Unit Trusts
Friendly
Societies
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Current Regulatory ambit / Regulatory Scope
Size of the Regulated Financial Sector
No. of institutions
494
No. of intermediaries Assets N$
4 572
N$ 488,1 billion
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Current Regulatory framework / Challenges
Non Bank Financial Institutions (NBFIs) sector suffers from the
following major deficiencies:
 Stale Legislation
 outdated
and fragment
legislative framework for regulation and
supervision
 hugely on a compliance driven approach to supervision
 does not provide NAMFISA with adequate supervisory and enforcement
powers
 does not recognize the inter-linkages within the financial sector, locally,
regionally and internationally
 An administrative board and has no regulatory functions; and
 A mandate that does not explicitly include consumer education and financial
stability.
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Proposed Legislative reforms / Bills and status
 Bills are aligned to international standards and practices and recommendations (IOPS, IAIS,
IOSCO).
 Principle-based regulation - Approvals and rules are based on principles related to risks and
managing risks rather than prescriptive rules mandated by the regulator.
 Proposed Bills:
 Financial Institution and Markets (FIM ) Bill – consolidated legislation
 Supported by subordinate legislation i.e. Regulations and Standards
 NAMFISA Bill
 Financial Services Adjudicator (FSA) Bill
 Microlending Bill
 Supported by subordinate legislation i.e. Regulations and Standards
 Consumer Credit Bill
 Status:
 The Bills are in their final phase (promulgation expected in 2017/2018 Fin year)
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Proposed Legislative reforms / Benefits
 An integrated approach to supervision and regulation of the NBFIs, in
particular uniformity and consistency of rules and provisions, resulting in:
 Elimination of silos; and
 Elimination of conflicting provisions and regulatory arbitrage.
 Minister and NAMFISA to issue Regulations and Standards respectively
 Provides for greater regulatory responsiveness, i.e. flexibility in adapting
standards and regulations
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FIM Bill /Scope of regulation (General provisions)
 Registration which requires a test for fit and proper of key persons
 Prohibits operation of unregistered entities
 Powers to impose conditions for registration
 Financial institutions to maintain principal office and principal officer in
country
 Governance issues and board composition of NBFI’s
 powers to require compliance and adopt sound governance
practices
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FIM Bill / Scope of regulation (Supervision)
Main “new” supervision provisions include:
Required filings – audits, valuations (short-term insurers
required to submit actuarial reports);
Power to direct replacement of board members;
In-sourcing requirements;
Power to require special reports; and
Power to cancel registration and effect fund or insurer windup.
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FIM Bill / Scope of regulation (Governance)
Main governance provisions include:
 Board members to be fit and proper;
 Fund Members have right to elect board members (Shareholders for
insurers);
 Rules of Funds to require board code of conduct;
 Board to act prudently and avoid conflicts of interest;
 Board mandated to perform specific functions;
 NAMFISA may direct replacement of directors (Insurance) or board
members (Funds); and
 Board members to comply with “duty of care” provisions, requiring that
they take account of interests of stakeholders, act honestly and in good
faith, etc.
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FIM Bill / Scope of regulation (Governance continued)
Boards of Insurers and Funds have specified duties, including:
 Administration of Fund;
 Follow appropriate investment policy for Insurer or Fund;
 Manage risks;
 Provide communication to Fund members;
 Ensure required Fund contributions are made;
 Ensure compliance with law;
 Meet at least annually; and
 Funds to prepare and file special annual report and submit to NAMFISA.
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FIM Bill / Supervision
 Supervision - ensuring approved persons comply with the rules.
 NAMFISA directly supervises level A approved persons.
 Level A approved persons supervise level B approved persons, while
NAMFISA retains indirect oversight.
 Enforcement - taking action against non-compliers to withdraw approval,
or to impose conditions or administrative penalties: by NAMFISA against
level A approved persons; by level A approved persons against level B
approved persons; by NAMFISA against level B approved persons where
level A approved persons fail to take appropriate action or to react to a
complaint, including remedial action.
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INSPECTIONS / Supervisory Ladder of Intervention
Stages
No.
of % of total Remarks
entities
entities
Stage 1 (no significant
problems)
334
Stage 2 (early warning)
74
15%
Stage 3 (risk to viability or
solvency)
33
7%
Stage 4 (future
23
4%
viability in
68%
sound.
30
6%
Total
entities
494
100%
for
the
compliance
the
supervisory
Micro
insolvency imminent)
NAMFISA
continues to engage the
through
serious doubt)
Stage 5 (entity not viable or
Generally NBFIs sector is
non-
issues
ladder
of
intervention.
lending
sector
contributes significantly to
stages 5 entities
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INSPECTIONS / Key Findings
Supervisory
interventions
stages
Pension
Funds
Medical
Aid Funds
& Friendly
societies
Collective
Investment
schemes (incl.
UIM & SPV)
Microlenders
Capital
Markets
Shortterm
Insurance
Long-term
Insurance
Stage 1 – no
significant
problems
70
4
50
168
20
13
9
334
Stage 2 – early
warning
17
3
0
42
6
0
6
74
Stage 3 – risk
to viability or
solvency
4
2
0
23
1
1
2
33
Stage 4 –
future viability
in serious
doubt
1
1
0
21
0
0
0
23
Stage 5 – entity
not viable or
insolvency
imminent
1
3
0
23
2
1
0
30
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Total
INSPECTIONS / Key Findings - FIA Compliance
 Inadequate / Absence of risk management process
laundering/terrorism financing/proliferation of financing risks;
on
money
 Inadequate customer due diligence ( CDD) information;
 Non – reporting of suspicious transactions and activities;
 Non – reporting of cash transactions above thresholds;
 Inadequate scope for independent audit function to evaluate effectiveness
of controls; and
 Inadequate staff training and awareness on AML.
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INSPECTIONS / Key Findings- INSURANCE
 Insurers
 Board Compositions not in accordance with NAMCODE
recommendations i.e. composition of independent vs. non –
independent
 Inadequate and incomplete disclosure in AFS
 Dealing with unregistered intermediaries (brokers and agents)
 Vague provisions in policy contracts
 Insurance intermediaries
 Lack of knowledge of the Act(s)
 Provision of AFS as required
 Maintaining licensing requirements
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INSPECTIONS / Key Findings - PENSION FUNDS
 Non-compliance to the Pension Funds Act:
 Constitution of the Board of Trustees in accordance with the rules of the Fund;
 Specifying benefits and contribution information in accordance with the Act;
 Late payments of pension benefits and payment contributions;
 Practices which are not provided for in the rules of the Fund i.e. a new benefit
or contribution rate or remuneration of fund officials;
 The absence of policy documents (i.e. Board Charter, Code of Conduct, Risk
Management Policy, Investment Policy, Complaints Policy, Communication
Policy, Conflict of Interest Policy) or adequate Service Level Agreements with
service providers
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INSPECTIONS / Key Findings
UIMs, SPVs, UNIT TRUSTS & INVESTMENT MANAGERS
 Changes in directorship, portfolio managers and other key persons
without notifying the Registrar as requirement by law;
 Non adherence to corporate governance principles;
 Unsigned Board Charter
 Lack of documented board minutes and resolutions
 Independent directors not in the majority at some Board Meeting to
review key decisions such investments as requirement by the law
 Loans from/to related parties/investee companies were made which
are not in compliance with the law (Regulation 29)
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INSPECTIONS / Key Findings - Microlending Industry
 Non-adherence to the prudent loan disbursement guidelines of NAMFISA
 Key responsible persons (KRPs) had little or no knowledge of the Financial
Intelligence Act No.13 of 2012 and the requirements thereof.
 Continuous charging of the default penalty interest for periods more than
the prescribed maximum 3 months.
 Unsatisfactory status of submission of returns and the payment of levies.
 Degree of confidentiality not satisfactory (waiting customers privy to
conversation between Loan Officer and borrower being attended to).
 Retention of Bank Cards and PINs and original IDs as security for loans;
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REGULATORY AND SUPERVISORY REFORM AGENDA
SADC organ CISNA
 Harmonisation of laws and Licensing Requirements
 Facilitate wider access to non-bank financial products and services i.e. the
micro-insurance
 Facilitate the development of well informed investors and consumers
Joint Supervisory Activities
 “Conglomerates” / Groups across NAMFISA
 Conglomerates” / Groups with/within banks
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Meet the Board end
Questions ?
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