Kenya: 2009 Ernst and Young Budget Review

Tuesday, 16 June 2009

Page 4 of 7   FINANCIAL INSTITUTIONS ANALYSIS Commercial Banks (Cap. 488) Central Bank of Kenya Regulations and Compliance The Banking Act has now defined “agency” as an entity contracted by an institution and approved by the Central Bank to provide the services of the institution on behalf of the institution, in such manner as may be prescribed by the Central Bank. Previously, the Banking Act did not define “agency”. Activities and regulations on institutions extended to cover the institution's duly approved agencies as follows: a) Transaction of banking business can be conducted through the institution's agencies. Previously, institutions were not allowed to conduct banking business through an agency. b) Deposits can be invited or accepted by an agency in the course of carrying on a deposit-taking business on behalf of an institution. This provision was not there previously. c) The Central Bank can collect data or information from agencies for the purpose of supervision and surveillance of the affairs of institutions. The agencies may be required to submit statistical and other returns on a periodic basis in addition to any other returns required by law. d) The agencies may be required to furnish information to the Central Bank for the proper discharge of its functions. Previously, this requirement did not include agencies. e) The Central Bank inspections to cover the books, accounts and records of institution's agencies. The definition of “place of business” has been included in Banking Act to mean any premises, other than the head office, including a branch, an agency or a mobile unit, or such other premises prescribed by the Central Bank, at which an institution transacts banking or financial business in Kenya and which is open to the public. The Cooperative Bank of Kenya Limited has been recognized as a bank. Previously, it was not specifically included in the definition of a bank. The branch of a bank clarified to be permanent premises. Previously, any premises where an institution transacted its business whether permanent or temporary could be deemed as a branch. For the purpose of restrictions on trading and investments, the restricted activities have been expanded to include those undertaken outside Kenya . Previously, the restrictions only applied to activities carried in Kenya . An institution can now own more than 25% of share capital or beneficial interest in corporations established for the purpose of promoting development in a foreign company licensed to carry on the business of the institution in its country of incorporation. This is upon approval by the Central Bank. The Central Bank has discretionary powers to grant the approval. Previously, such ownership was only possible where corporations were established for the purpose of promoting development in Kenya . Dividends payment or any form of distribution to shareholders can only be made upon making provisions for loans, advances and other assets. Previously, the law just mentioned the provisions for bad and doubtful debts without elaborating its constituents. • Institutions to make a provision for loans, advances and other assets before declaring any profit or loss and ensure the provisions are in accordance with the guidelines of Central Bank. Central Bank may disclose information to fiscal or tax agency and fraud investigations agency for the proper discharge of their functions. Previously, such disclosure was limited to monetary authority or financial regulatory authority. Institutions allowed to share information with institutions outside Kenya in cases where there is a reciprocal arrangement. Central Bank of Kenya Act (Cap. 491) The Central Bank now required to provide the Minister with a time-bound remedial plan in situations where the Bank is unable to maintain a reserve of external assets at an aggregate amount of not less than the value of four months' imports as recorded and averaged for the last three preceding years. The general penalty for an offence with no penalty prescription under the CBK Act has been prescribed as a fine not exceeding five hundred thousand shillings, or to imprisonment for a term not exceeding three years, or to both. Kenya Post Office Savings Bank Act (Cap. 493B) The functions of the Kenya Post Office Savings Bank now expanded to include dealing in foreign exchange. Previously, the bank could not handle forex transactions. INSURANCE ACT Amongst other proposals, the minister proposed measures to restrict ownership and management of insurance companies in order to promote good governance. Control, direct or indirect beneficial entitlement of listed share capital, voting rights, appointment of board of directors, aggregate dividends received in any financial year capped at 25% for a person. However, this does not apply to local and foreign corporate entities licensed under the insurance, banking, pensions or securities in their respective jurisdictions, the Government of Kenya and state corporations. Compliance by 31 December 2010. A person cannot qualify for executive appointments if: their control; or beneficial entitlement to the listed share capital or voting rights; or Board appointments; or aggregate dividends of the insurer is over 20%. Compliance by 31 December 2010. General insurance business investment assets in a company or a group of companies which is a bank or a financial institution or a group of banks or financial institutions capped at 10% in determining the margin of solvency. Upon change of ownership of a motor vehicle, insurers to issue a temporary policy for a period not exceeding three months pending registration of the vehicle in the name of the new owner. Insurers will neither renew the temporary cover nor issue a new policy, unless the new owner provides proof of registration of the motor vehicle in his name by the Registrar of Motor Vehicles Yearly application for renewal of registration of members changed from 30th November to 30th September. Penalty of 5% is payable on due claims that remain unpaid after expiry of the prescribed period or any extension thereof. Quorum for conduct of business of the Board of the Insurance Regulatory Authority shall be five members excluding the Commissioner of Insurance and at least two shall be non-public officers appointed by the Minister. Inclusion of insurance regulations to include new regulation on deposits required to be kept with the Central Bank of Kenya to be kept under lien in favour of the Insurance Regulatory Authority Bank's guarantee required for brokers to the Authority and no longer to the Commissioner Renewal and registration fees payable to the Insurance Regulatory Authority and not the Permanent Secretary to the Treasury << Start < Prev 1 2 3 4 5 6 7 Next > End >>