![[Kenya] Bank regulator issues 14 day ultimatum to banks to cap lending rates](Central Bank Kenya.jpg)
[Kenya] Bank regulator issues 14 day ultimatum to banks to cap lending rates
Banking sector regulator in Kenya, the Central Bank of Kenya, has given commercial banks and mortgage financial institutions 14 days to cap lending rates at 14 per cent of the base lending rate failure to which their chief executive officers will be jailed.
This comes following the assenting into law by President Kenyatta, the Banking (Ammendment) Act 2016. The new law also stipulates that banks shall pay deposit rates of at least 70 per cent of the central bank rate, or else be fined Sh1 millions and incase of default, the bank chief executive will face one year in jail.
It also demands that banks disclose to the borrower all charges and commissions when issuing loans.
President Uhuru Kenyatta signed into law a Bill capping bank interest rates saying that banks have failed to reduce the cost of money for Kenyans despite reaping huge profits.
“This is to notify you that the banking amendment act 2016 has been duly published vide a special gazette supplement number 143, dated August 31, 2016, the date of commencement is September 14, 2016,” the regulator said.
At least four commercial banks have already complied with the new ruling marking a major milestone in Kenya’s banking history. These are KCB, CFC, Co-operative Bank and Chase Bank.
Central bank governors in Tanzania and Uganda said they will closely watch the impact of the move on markets to see if it works adding that Kenya is the most sophisticated financial centre in Africa outside South Africa.
Banks are required to lend at not more than 4 percent above the central bank rate.
