Strong legal framework key to financial markets growth: RBZ
GROWTH of financial markets in the country hinges on a strong legal framework, the Reserve Bank of Zimbabwe (RBZ) has noted.
Speaking at the ongoing workshop for officials from central banks, ministries of finance and capital markets regulators from eastern and southern African countries, RBZ deputy governor Kupukile Mlambo said the importance of a vibrant financial market with a strong legal framework cannot be overemphasised as it provides certainty of legal rights of claims.
“The cornerstone that underpins the development of the above financial market factors is the legal and regulatory framework,” Mlambo said. He further indicated that the development of financial markets is promoted through legal and regulatory frameworks that provide a structure to enforce rules, facilitate monitoring and oversight and protect investors.
The week-long workshop on legal and regulatory issues in domestic financial markets development was organised by the Macroeconomic and Financial Management Institute of Eastern and Southern Africa.
“The smooth operation of financial markets is hinged on the legal and regulatory environment which provides certainty of legal rights of claims of financial institutions and gives predictability of fair enforcement.
“Further, empowerment of and coherence between financial regulators and the conduct of market participants are governed by this same framework. Moreover, the speed and impartiality of execution results in methodical operation and development of the financial sector and garrisons market confidence.
“Therefore, it is important to remember that inadequate legal and regulatory framework can create concentration on the one hand and fragmentation on the other. Not only that, the inadequacy impacts both the confidence of investors and long-term financing capabilities,” the central bank deputy governor added.
A recent World Bank assessment of legal and regulatory frameworks in financial markets in eastern and southern African countries concluded that the markets were relatively underdeveloped and that there is need to institute measures to review and modernise them if they are to contribute more to economic growth.
Adding that these reviews should ideally be aligned to agreements reached at regional level and speak to the integration criteria, Mlambo said: “This regional agenda is entirely useful for the co-ordinated development of the domestic financial markets, in terms of reducing regulatory burden by harmonising financial laws and processes and integrating systems to reduce monitoring and mitigate risk.”