Regulatory Alerts2020-03-27
Banking Circular No. 3 of 2020 - Implementation of Emergency Measures
This letter is from the Central Bank of Kenya (CBK) to commercial banks and mortgage finance companies. It addresses emergency measures to mitigate the adverse impact of COVID-19 on loans and advances. These measures will be applicable only to borrowers whose loan repayments were up to date as at March 2, 2020. The relief granted will not apply to new loans taken after that date. The letter provides guidance for banks to work with their customers in alleviating the likely adverse economic effects caused by COVID-19 while safeguarding banking system soundness. These measures include extending and restructuring loans, which will not be subject to specific clauses of the banking regulations during this period. For businesses affected by the pandemic, banks are advised to offer a reprieve on interest rates for loans or advances for a period of up to six months, with a possible extension for another six months. They should also consider freezing interest rates and providing moratoriums on loan repayments for borrowers facing financial difficulties due to COVID-19. The CBK encourages banks to exercise prudence in assessing the risks associated with these measures and take necessary steps to ensure their compliance with the existing regulatory framework. They should also provide timely updates to the CBK on any developments or issues arising from implementing these emergency measures.