NAIROBI, Kenya, Feb 7- East African bankers are calling for the formulation of a common policy framework if the region’s Monetary Union is to be achieved.
The regional bankers want regulators in the five member States to come up with a structure that incorporates the banking, insurance and capital markets.
EAC Deputy Secretary General Alloys Mutabingwa said with the regions Monetary Union expected to be launched in 2012, a sound and secure framework needs to be in place.
“We want to bring together other bankers, insurers, capital markets and securities industries to chart the way forward,” Mr Mutabingwa said.
He was speaking at the conclusion of an East African Bankers Association meeting held in Nairobi. During the meeting, bankers came up with a draft memorandum of understanding on terms of reference between the five member states.
Mr Mutabingwa believes that for the full actualisation of the East African Community Common Market, the region’s financial services sector needs to be interlinked and share a common goal.
The regional bankers association is expected to present a draft framework for the banking sector in March.
The EAC Secretariat has already set up the East African Monetary Union that is expected to spearhead the integration of the region’s financial systems.
The capital markets regulators have already formed the East African Securities Exchange Associations that is working on a framework for linking of the region’s stock markets.
Mr Mutabingwa said the stage was set for the realisation of a Monetary Union in the region.
"Setting up of a taskforce for the establishment of a Monetary Union is critical for an effective Common Market to function," he said.
He pointed out that the success of a Monetary Union largely hinges on the successful implementation of the Common Market, which calls for free movement of persons, goods, labour and capital.
The European Central Bank (ECB) has already carried out and presented a study to the EAC secretariat that focused on the feasibility of a monetary convergence in the region.
In its report, the ECB argued that the changeover from national currencies to a single one should be properly anchored in society, and particularly in the financial industry.
Mr Mutabingwa said it would be critical to streamline partner states’ macroeconomic policies to conform to the proposed currency shift.
"When coming up with a common currency, a number of factors must be considered. Like in the case of the European Union, a common currency requires a common interest rate which central banks must work on," he said.
He said successful monetary and financial integration would only be achieved with a sustainable convergence of economic fundamentals, particularly price stability and sound fiscal, monetary and structural policies.
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