Kenya: Strict conditions for banks to access liquidity support facility

Apr 19, 2016

The facility was set up to help banks under liquidity pressure.

The Central Bank of Kenya (CBK) has set strict conditions for banks seeking to access a new liquidity support facility.

The facility was set up last week to help banks under liquidity pressure and restore confidence in the country's banking sector after Chase Bank was placed under receivership.

CBK governor Patrick Njoroge outlined the conditions at the end of last week. To access the facility, a bank must reorganise its assets and consolidate its investments.

It must also bring in additional equity funds from shareholders and sell any foreign currency it may be holding.

In addition, the candidate bank also needs an action plan towards re-establishing relationships with other banks if it has lost credit lines to other financial institutions. It will also need to slow down lending.

"The facility is tailored for commercial banks and microfinance (…) There will be daily monitoring and reporting, weekly status report as well as a targeted inspection on the lender," the governor said, quoted by Capital FM.

In the last nine months, three banks - Chase Bank, Imperial Bank and Dubai Bank - have been placed in receivership, which is believed to have caused a decline in market confidence towards small and midsize Kenyan banks.ADNFCR-2976-ID-801816809-ADNFCR