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CBK To Become Irrelevant if the New Bill Becomes Law

BY Soko Directory Team · May 30, 2018 08:05 am

The Central Bank of Kenya will become irrelevant if the new draft bill to regulate the conduct of banks will become law.

According to the CBK Governor Dr. Patrick Njoroge, the role of regulating banks is in the hands of CBK and the new law is set to take that role away.

The Financial Markets Conduct bill published last week by the finance ministry proposes to create a regulator in addition to the central bank to deal with the conduct of lenders.

The ministry says the bill aims to protect consumers from lenders who charge high rates for services provided over mobile phones. It is open for review and comment by the public and industry and will be presented to parliament next month.

Critics say a proliferation of lenders using mobile phone financial technology to extend credit to people even if they do not have bank accounts is saddling borrowers with high-interest rates and leaving regulators scrambling to keep up.

The government caps the rate banks can charge their customers for loans at 4 percentage points above the central bank rate, saying they were charging very high rates. But lenders who offer mobile phone services are exempt from that rule because they are not covered by the banking act.

“The bill emasculates the central bank (which) … is under attack,” Njoroge told a news conference. It relegates the banking act and leaves bank customers at the mercy of lenders by curbing the central bank’s ability to regulate fees and charges, he said.

It also takes away the central bank’s ability to deal with “reckless lending”, limits its power to issue prudential guidelines and place banks under receivership, he said.

Read the full story from CNBC AFRICA

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