Region

Jurisdiction

Regulator

2020-03-27

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.

Kenya

Central Bank of Kenya

Haile Selassie Ave P.O. Box 60000 - 00200 Nairobi, Kenya Telephone: 2860000, Fax: 3401 March 27, 2020 BANKING CIRCULAR NO. 3 OF 2020 To: ALL CHIEF EXECUTIVES OF COMMERCIAL BANKS AND MORTGAGE FINANCE COMPANY IMPLEMENTATION OF THE EMERGENCY MEASURES TO MITIGATE THE ADVERSE IMPACT OF CORONA VIRUS (COVID 19) PANDEMIC ON LOANS AND ADVANCES Further to the emergency measures announced on March 18, 2020, the Central Bank of Kenya (CBK) writes to provide guidance on loans classification and provisioning of extended and restructured loans. This circular aims to enable banks work with their customers to alleviate the likely adverse economic effects they may face from COVID 19 pandemic while safeguarding banking system soundness.

The relief granted under the emergency measures will only apply to borrowers whose loan repayments were up to date as at March 2, 2020 and classified under normal category in accordance with the CBK Prudential Guideline on Risk Classification of Assets, Provisioning and Limitation of Interest on Non-performing Loans (CBK/PG/04).
Banks will engage individual borrowers who request for relief on their personal loans and based on their individual circumstances, directly attributable to the pandemic determine the best relief to offer. The relief granted should be based on the assessment of the borrower's capacity to pay under the proposed new terms.
Where a determination is made to grant a request for relief on personal loans through extension of the repayment period, the extension should not exceed one year from March 2, 2020.
Micro, Small and Medium-sized Enterprises (MSMEs) and corporate borrowers may also make requests to banks for relief due to circumstances related to the pandemic. Banks will make an assessment and restructure the loans based on the respective circumstances arising from the pandemic.
Personal loans whose repayment has been extended for up to one (1) year and the other loans restructured due to the pandemic shall not be subject to Clauses 3.2 (Classification of loans), 3.3 (Classification categories) and 3.5 (Classification of renegotiated loans and advances) of CBK/PG/04 for a period of up to one (1) year from March 2, 2020.
Banks will be required to document and keep records of all the extended and restructured facilities under the emergency measures. The records should contain details of the particular circumstances in relation to the pandemic, monitoring measures adopted and the set timelines for reverting to normal requirements.
Banks will meet all the costs related to the extension and restructuring of loans.
All loans extended and restructured under emergency measures shall be reported to CBK on a monthly basis in the attached format.

The initial return for the month ending March 31, 2020 will be due on or before April 10, 9.

The purpose of this Circular is to; a) Provide guidance to all Commercial Banks and Mortgage Finance Company on the implementation of the recommended emergency measures on extended and restructured loans.

b) Require submission of monthly returns to CBK in the prescribed format by the 10ª of every succeeding month.

Yours faithfully,

GERA LD NYAOMA DIRECTOR, BANK SUPERVISION Cc.: Dr. Habil Olaka Chief Executive Officer Kenya Bankers Association International Life House, Mama Ngina Street NAIROBI.

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	End Date:	Start Date:
	inancial Year
ubo ] jo .isquin)	synoM E - I
siaquan	SSOWAL HOUSEHOLD SECTOR ETENDED LOANS FE
	s - 6 Months
(000, 48)
siunosov	suluoM 6 -	gth of Loan Period Exter
sioqunny	9 - 12 Months
(000, 46)
Number
of Loan
Acounts	Crand Total
(000. 45)
(000. Bangla ()

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rade	suoloog
sriculture	End Date:	Start Date:	stitution:
	Financial Year:
STATOT GAAA
slotoH bus instrummoO bus noqsmail l	THA SECTIONS BESTAUCTURED LOANS RET
s conoma	usquiny
	(รอวุธ)
(,000, 48%)
uso I 10	no) mairots10M
(,000, "4sy)
uroooy
JoqunN	aterest rates/Fec
	freeze	ire of Restructur
(,000, usy)
uso I jo	gainnismssy
(,000, dsy)
s unoso I	jumber of	Grand Tota
(000, 45)
stunosov	noM adt ni boviosa
(000, qsy)