Kenya finance bill would emasculate central bank -bank governor (updated)

Subaru Co

29/05/2018 10:25

(Adds details)
    By Duncan Miriri
    NAIROBI, May 29 (Reuters) - Kenya's central bank will be
emasculated if a draft bill that aims to regulate the conduct of
financial institutions becomes law, bank Governor Patrick
Njoroge said on Tuesday.
    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. 
    Finance ministry officials were not immediately available
for a comment. 
    The bill does not propose repealing the government's cap on
commercial lending rates, which local banks and the
International Monetary Fund blame for sluggish growth in
private-sector credit.
    The central bank faced criticism in 2011 after inflation
rose to nearly 20 percent and the shilling weakened to record
lows against the dollar but it has won praise for maintaining
macro-economic stability since then.
    Njoroge, who was appointed in June 2015 from a senior post
at the International Monetary Fund in Washington, was also
credited with a robust response to the collapse of three
financial institutions soon after he took office.
    He said he had been warned there were some unnamed parties
that were keen on creating mischief and frustrating the central
bank's fight to keep its independence, but he said he was ready.
    "I have been warned in various ways about certain parties
that lie in wait, poised for mischief but our actions have
consequences, after all this is Kenya, we are ready for that,"
he said. "That menace shall find us at our post and unafraid."
    He did not give details about who was making the threats.
    Njoroge also said lower fiscal deficit targets set by
authorities would be challenging to meet, but if they were
achieved it would create room for monetary easing.

 (Editing by Matthew Mpoke Bigg)
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