15 June 2012

Kenya: New Rules to Enhance Transparency in Banks

Commercial banks will have to openly display their latest annual financial statements in all their offices at all times, if changes in the Banking Act are passed. Proposals made in the 2012 Finance Bill also propose that the institutions will have to display names of all the bank officers alongside the statements.

"Every institution shall exhibit throughout the year in a conspicuous position in every office and every branch in Kenya a copy of its last audited financial statements which shall be in conformity with the minimum financial disclosure requirements...." reads proposed section 22 of the Banking Act. "With the full and correct names of all the persons who are officers of the institution in Kenya."

This is among the interventions by the government to strengthen the financial sector through new regulations and coordinated supervision within and across the borders. The banks will also be required to publish their end year balance sheet and last audited income within three months of closing the financial year.

These changes to the Banking Act are among other changes that are being introduced in the banking sector. The Central Bank will now be able to regulate, supervise and protect operations of bank's subsidiaries outside the country.

"The Central Bank shall require in writing any subsidiary company to provide the Central bank or its appointed agent such information or documents ...as it may deem necessary," reads the Bill in part.

Among the things that the CBK might want to ascertain is the risk profile of a group and its individual subsidiaries. Several Kenya banks have regional subsidiaries with Equity Bank, KCB, Diamond Trust Bank on the lead while others like Co-operative Bank and Family bank also plan to go regional.

"This will hinge on information sharing and co-ordination between the CBK and other regulators, particularly in the region where Kenyan banks are expanding their footprints," said Finance Minister Njeru Githae while introducing the new proposals.

Banks will also now be charged with supervising and fully monitoring financial business driven by their agents under the agency-banking model and mobile banking.

Under the newly constituted credit information sharing system, the credit-only microfinance institutions and SACCOs will now be required to share customers credit ratings. They will also be able to access that information.

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