Financial Stability Challenges for Central Banks: Bank of Tanzania Experience
Increasing inter-linkages in financial institutions have heightened risks, requiring coordinated oversight at national and regional levels. Bank of Tanzania takes the lead in promoting financial stability through dedicated measures and reports to mitigate potential threats.
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Presentation Transcript
FINANCIAL STABILITY- NEW CHALLENGES FOR CENTRAL BANKS BANK OF TANZANIA EXPERIENCE Presented at the AACB 2016 Continental Seminar Cairo-Egypt, May 9, 2016 Bank of Tanzania
2 Scope 1. Introduction; 2. Challenges of Financial System Stability oversight and policy at: Central Bank Level National level Regional level 3. The Way Forward.
3 Introduction Increasing inter-linkages between financial institutions, markets and markets infrastructure at national, regional and global levels has heightened risks transmission channels. This was reflected in 2007/08 Global Financial Crisis. The Crisis highlighted the need for coordination of Financial Stability oversight and policy at national and regional levels.
4 Bank of Tanzania Bank of Tanzania takes the lead in promoting financial stability. A dedicated Financial Stability Directorate to undertake macro- prudential analysis, recommend macro-prudential policy actions in order to mitigate potential threatsin the financial system and coordinate financial crisis preparedness, management and resolution. Financial Stability Reports are produced twice a year to inform stakeholders of the financial system, on the potential vulnerabilities and mitigation policy measures.
5 Challenges Limited data: to monitor vulnerabilities that exist on household balance sheet and real estate sector. Limited capabilities in monitoring systemic risks arising from: Usage of mobile platforms (banking sector and markets), Liberalization of capital account. Incomplete banking crisis management framework: Lack of ELA arrangements; Lack of resolution funding framework; Communication strategy.
6 National Level The role of coordinating financial stability oversight, crisis management & resolution at national level is conducted through Tanzania Financial Stability Forum, chaired by the Governor - Bank of Tanzania. The Forum mandate is derived from an MOU. Members of the Forum: BoT, Ministries of Finance, Deposit Insurance Board & regulators for Insurance, Social Security & Capital Markets. Challenges: Whether to replace the MOU with legislation in order to enhance enforcement of the Forum decisions. Lack of national crisis management framework.
7 Regional Level Expansion of Pan-African Banking Groups raises new regulatory challenges: Cross-border Prudential Banking Supervision; Macro-prudential Oversight; Cross-border Financial Crisis Management & Resolution. Cross-border Prudential Banking Supervision Lack of regulatory oversight of bank holding companies in some jurisdictions; Limited cooperation in cross-border supervision. Macro-prudential Oversight Lack of Regional cooperation on macro-prudential oversight. Cross-border Financial Crisis Management & Resolution. Lack of regional arrangements for cooperation in cross-border crisis management & resolution.
8 The Way Forward Continue to develop and improve existing early warning systems: Conduct min HBS annually in collaboration with NBS; Develop surveillance tools for real estate sector; Strengthening institutional capacity for development and implementation of macro-prudential policy: Whether to replace the MOU with legislation in order to enhance enforcement of the Forum decisions--Review BOT ACT; Enhance coordination of risk management and crisis resolution at national and regional arrangements.
9 Thank You!
