This archive report was first published on 28 November 2019.
The Central Bank of Kenya (CBK) has issued a warning to commercial banks and mortgage finance companies to comply with the Kenya Banking Sector Charter, signed in February 2019.
The charter, which has four pillars – customer-centricity, transparency, risk-based credit pricing, and ethical culture – requires banks to submit their time-bound plans to comply with the charter by the end of May 2019.
According to a Circular No 15, 2019, issued by CBK, failure to comply with the charter will attract appropriate remedial action as provided for under the Banking Act.
CBK has also clarified that banks cannot revise interest rates upwards for loans taken while the rate cap law was in force, and rates on such loans will remain fixed until the loans run their full course.
With the removal of the rate cap law, banks will now be required to use a risk-based credit pricing model and give loans based on a borrower’s good and adverse information at the Credit Reference Bureau (CRB).
Additionally, lenders will be required to disclose all fees, charges, and terms to enable borrowers to gauge their ability to afford a product or not.
CBK will be contacting banks to confirm a date and time for a presentation and engagement on their implementation plans towards compliance with the charter.
