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Central Bank Cracks Down on Financial Institutions’ Operations

In a move aimed at strengthening regulatory oversight, the Central Bank has introduced new measures to govern the operations of financial institutions in Kenya. The changes, which take effect immediately, are designed to ensure that these institutions operate in a safe and sound manner, protecting the interests of depositors and the broader economy.

Approval Lapses After 12 Months

Under the new rules, any approval granted by the Central Bank for a financial institution’s operations will lapse if it does not commence within 12 months. This is aimed at preventing unnecessary delays and ensuring that institutions are accountable for their actions.

Branches and Subsidiaries

The Central Bank has also introduced stricter regulations governing the opening of branches and subsidiaries outside Kenya. Institutions seeking to establish such entities must now obtain prior approval from the Minister, which will be granted only after satisfying certain conditions, including a review of the institution’s history, financial condition, and capital structure.

Amalgamations and Transfers

The new rules also cover amalgamations and transfers of assets and liabilities between financial institutions. The Minister’s approval is now required for such transactions, which will only be granted if they are deemed to be in the public interest. Upon completion of an amalgamation or transfer, the acquiring institution will inherit all the rights and obligations of the merged entity.

Notice Requirements

The Central Bank has also introduced notice requirements for financial institutions planning to close branches or subsidiaries outside Kenya. Institutions must now provide six months’ written notice to the Minister through the Central Bank, although this period may be shorter in certain circumstances.

Conclusion

These new regulations are aimed at enhancing the stability and resilience of Kenya’s financial system, and the Central Bank is committed to monitoring their implementation closely to ensure that they achieve their intended objectives.