Legal & Regulatory Environment
The legal and regulatory environment plays a pivotal role in the smooth operation of the financial sector and in the efficient management and integration of capital flows and domestic savings. The value of the claims of financial institutions on borrowers is dependent upon the certainty of legal rights, coupled with the predictability and speed of their fair and impartial enforcement. Legal and regulatory frameworks that empower the regulator and govern the conduct of market participants form the cornerstone of the orderly operation and development of the financial sector.
To encourage financial sector development, the legal and regulatory environment should provide a framework that enables the development of sustainable markets, facilitates monitoring and enforcement of rules, and ensures investor protection. Accordingly, a well-functioning system combines a repertoire of up-to-date laws and regulations backed by strong institutions with effective monitoring and enforcement mechanisms.
In recent years, the legal and regulatory environment of several African countries has been undergoing a necessary process of modernisation and establishment of more effective enforcement mechanisms. Several countries are currently in the process of undertaking legal reforms, and efforts are underway in several regional organizations to harmonize legal and regulatory frameworks across member states.