The Central Bank of Kenya will be introducing a new tool that will allow banks to instantly receive any changes on the lending rates while revealing that three banks remain behind in meeting the demands for core capital.
According to CBK Governor Kamau Thugge, the apex bank is implementing a series of changes to seal loopholes that cause delays in Kenyans accessing cheaper loans.
Thugge revealed that the CBK is planning to introduce new methods for determining the Central Bank Rate, which is the interest rate at which the CBK lends to commercial banks.
He noted that efforts are underway to either introduce a new system for setting the rate or amend the existing method, with a proposal expected to be submitted for approval within two weeks.
As per Thugge, CBK will ensure that the lending rates are reflected immediately on the side of the banks to ensure Kenyans are able to access loans at favourable rates almost instantly.
The issue of banks retaining lending rates stubbornly high despite CBK lowering its rate twice in a row rocked the country after the CBK reduced the CBR by 50 basis points to 10.75 per cent. Afterwards, banks took their time to lower rates, which had many, including Members of Parliament, up in arms.
While responding to questions from the Finance and National Planning Parliamentary Committee, Thugge revealed that three banks are lagging behind in meeting the minimum core capital requirements.
Last year, the CBK introduced new regulations requiring commercial banks to increase their minimum core capital from Ksh1 billion to Ksh10 billion.
Under the new regulations, banks are expected to meet the new capital requirement over a phased period of five years. The initial milestone mandates that banks raise their core capital to Ksh3 billion by the end of the current financial year.
However, according to the governor, 12 banks currently have a core capital below Ksh3 billion, though some are close to meeting the requirement. Three banks are struggling but are in talks with foreign investors and will provide more details on whether they will meet the requirements.
Thugge also addressed concerns regarding the management of the exchange rate, which has caused anxiety among many. He clarified that the exchange rate is “not being managed.”
“We have been able to buy dollars and not sell. We allow market factors to influence the exchange rate,” said Thugge.
He added, “The rate, where it is, is a good balance. It is not disincentivizing the market.”
