Financial Crime World

Central Bank Tightens Reins on Financial Institutions

The Central Bank of Kenya has introduced new regulations to ensure financial stability and transparency in the country’s financial sector.

New Regulations for Opening Branches or Subsidiaries

According to the Banking Act, No. 9 of 2006 and No. 10 of 2010, financial institutions must obtain prior approval from the Minister before opening branches or subsidiaries outside Kenya. This is aimed at ensuring that financial institutions operate in a responsible and prudent manner.

  • Financial institutions must provide written notice to the Central Bank six months prior to the intended closure of any branch or subsidiary.
  • The Central Bank has been granted powers to prescribe the manner in which approvals under this section shall be granted.

Regulations for Amalgamations and Transfers of Assets and Liabilities

The Banking Act has also introduced regulations governing amalgamations and transfers of assets and liabilities. No financial institution can merge with another or transfer its assets and liabilities without prior written approval from the Minister.

  • The approval will only be granted if the transaction does not pose a threat to the public interest and meets certain conditions.
  • Upon the completion of the transaction, all assets and liabilities of the merging institutions will vest in the new entity, which will have the same rights and obligations as the merged institution.
  • Any agreements, appointments, transactions, or documents entered into by the merging institutions will remain in force and effect, subject to certain exceptions.

Requirements for Providing Information

The Central Bank has been granted powers to require financial institutions to provide information on their:

  • History
  • Financial condition
  • Capital structure
  • Viability
  • Earning prospects

before granting approval for amalgamations or transfers of assets and liabilities. This is aimed at ensuring that financial institutions operate in a responsible and prudent manner.

Purpose of the Regulations

These regulations are aimed at promoting stability and transparency in the financial sector, and ensuring that financial institutions operate in a responsible and prudent manner. By introducing these new regulations, the Central Bank hopes to promote a stable and robust financial system that benefits both individuals and businesses in Kenya.