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Kenya’s central bank seeks tougher penalties for rogue banks

NAIROBI (Xinhua) -- The Central Bank of Kenya (CBK) is working on tougher monetary penalties for errant commercial banks and credit reference bureaus in a bid to streamline the sector.

The apex bank has drafted new regulations to provide a clear framework for penalizing financial institutions that violate banking laws.

The East African nation has 41 commercial banks, one mortgage institution and at least three credit reference bureaus.

In the past months, poor practices have seen two banks collapse with customers’ deposits, one which has, however, been revived and the other was liquidated.

There have also been cases of banks helping the corrupt launder money while others heaping on borrowers illegal charges.

While the financial transactions involved have been huge, banks have been slapped with as low as 1,000 dollars fine by the Central Bank, a practice that the regulator is now keen to change.

“The CBK has drafted the Banking (Penalties) Regulations, 2017 to provide a clear framework for assessing and levying of monetary penalties to promote compliance with banking laws and enhance integrity of the banking sector,” said the Central Bank in a statement Wednesday.

Under the proposed laws, any institution that fails to comply with any provision of the banking laws or conditions imposed by the Central Bank shall be liable to a penalty not exceeding 194,174 dollars. Initially, the maximum the banks paid for a penalty was 9,708 dollars.

According to the Central Bank, some of the violations the banks would be penalized for include failure to maintain the minimum capital requirement prescribed under the banking laws, failure to maintain the prescribed minimum liquid assets and failure to maintain the prescribed insider lending limits.

Allowing a representative office to carry out banking business without the approval of the Central Bank and allowing a person to become a significant shareholder, director or senior officer of an institution before the Central Bank has approved would also attract a heavy penalty.

The banks would also be required to seek permission before granting loans, advances or other credit facilities exceeding 25 percent of the institution’s core capital.

This is one of the reasons a top bank collapsed in the East African nation as directors had lent huge amounts of money without approval.

Analysts noted that the laws are what the sector needs to tame rogue practices by some institutions as they search for profits.

“Right now there are many cases in court of customers suing commercial banks for illegal charges, especially on loans. And they are winning them. People are going to court because banks exploited the lack of proper regulations to infringe the rights of customers. The new laws are welcome,” said economics lecturer Henry Wandera.

The Central Bank is inviting comments from the public and financial institutions before ratifying them.



UK lauds Dubai for deporting Britain’s most wanted tax fugitive

DUBAI United Arab Emirates (Xinhua) -- The British Embassy in Abu Dhabi, United Arab Emirates (UAE), on Wednesday hailed Dubai authorities for their role in returning one of Britain’s “most wanted tax fugitives.”

Geoffrey Johnson was allegedly involved in complex fraud in the UK, including the theft of more than 800 million dirham (218 million dollars) and laundering of more than six billion dirham (1.63 million dollars).

He was deported from the UAE last week after the authorities caught him travelling to the country from Kenya on a false passport, UAE state news agency WAM reported.

Steve Baker, Regional Manager of the UK’s Fiscal Crime Liaison Network, said “Tackling trans-national crime requires a cohesive international response, and this result demonstrates cooperation at its best.”

The UAE does not levy income tax, and the oil-rich Gulf state is one of the UK’s closest political and economic partners in the Middle East.

Johnson had been on the run since 2014. Baker said the fugitive believed he could illegally enter Dubai from Kenya to evade capture.

Johnson will now face over 24 years in prison for committing “serious crimes,” said Baker.


Kenya’s inflation rate to drop to within target range: central bank

NAIROBI (Xinhua) -- Kenya’s overall inflation rate is expected to drop to within the target range of 7.5 percent in the next two months, the country’s apex bank on Tuesday.

Central Bank of Kenya (CBK) Governor Professor Patrick Njoroge told a media briefing in Nairobi that the decline from the current level of 9.2 percent will be largely driven by lower food prices.

“As of now, Kenya is on very solid ground to reduce its inflation rate to less than 7.5 percent. Currently, it is difficult to get more precise projections because they will depend on the price of the common staples food,” Njoroge said.

The apex bank has set an inflation target of between 2.5 and 7.5 percent.

Njoroge added that overall inflation in the country has been on downward trend lately due to the impact of the recent rains on food production as well as government measures to control rising food prices.

He noted that the price of agricultural commodities are not driven by monetary dynamics unlike other commodities.

On Monday, the Central Bank of Kenya’s Monetary Policy Committee retained the benchmark rate at 10 percent in order to continue to anchor inflation expectations.

According to the Governor, the agricultural sector is not performing as well as the other sectors of the economy despite the lower food prices.

“The other sectors such as manufacturing, real estate, Information and Communication Technology and transport have continued to show dynamism even with the slowdown in private sector lending,” Njoroge said.


Kenya shilling steadies on central bank move

NAIROBI (Xinhua) -- The Kenya shilling was steady against the U.S. dollar on Tuesday following support from the central bank amid rising inflows.

The local unit traded at an average of 103.90, largely the same level it was at the start of the week on Monday.

The apex bank during the Tuesday trading session quoted the shilling at 103.91, nearly the same level the local unit was on Monday.

On the other hand, commercial banks placed the value of the Kenya shilling at between 103.90 and 104.05 as traders noted a surge in inflows, especially from investors seeking to buy Treasury bonds.

Analysts attributed the firmness of the shilling mainly to intervention from the Central Bank of Kenya (CBK).

CBK Governor Patrick Njoroge in a press conference in the capital Nairobi said Kenya’s foreign exchange reserves currently standing at 7.8 billion dollars, an equivalent of 4.63 months of import cover, were adequate to cushion the shilling.

Njoroge blamed the turbulence the shilling is currently facing to intense speculation ahead of the general election.

However, with the support from the central bank, analysts noted that the shilling is set to stabilize in the coming days.

The apex bank is also expected not to allow the currency to fall below a level that would destabilize the market.


Kenya’s bourse key index rises as large stocks gain

NAIROBI (Xinhua) -- Nairobi Securities Exchange (NSE) benchmark index rose 21 points Tuesday to close at a new high following increase in prices of various large stocks.

The NSE 20 Share Index ended the day at 3,679.43 from 3,658.65 in the previous session boosted by rise in prices of KenolKobil, Equity Bank and Cooperative Bank, among others.

However, turnover went down marginally as 43 million shares worth 10 million U.S. dollars were traded from the same volume worth 11 million dollars on Monday.

Safaricom, Kenya’s leading telecom was the top traded stock in the Tuesday session after moving 17 million shares, a decline from 19 million on Monday at unchanged price of 0.23 dollars.

At the second spot was Equity Bank, which traded 9.2 million shares at 0.40 dollars, a rise of 3.2 percent.

Electricity generator Kengen traded 4.1 million shares at unchanged price of 0.07 dollars to clinch the third spot while Cooperative Bank came fourth with 2.2 million shares at 0.14 dollars, an increase of 2 percent.

Regional oil marketer KenolKobil closed the list of the five most traded stocks during the session by moving 1.5 million shares at 0.15 dollars, a huge rise of 6.4 percent.

Turnover at the secondary bond market, however, rose as securities worth 16 million dollars were traded, an increase from 11 million dollars in the previous session.



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