Banking Circular No 4 of 2013 - Issuance of Prudential Guielines on Incidental Business Activities and Non-Operating Holding Companies

BANKI CENTRAL KUU YA BANK OF KENYA KENYA Haile Selassie Aven P. O. Box 60000 - 00200 Nairobi, Kenya Telephone: 2860000, Fax: 340192 BANKING CIRCULAR NO. 4 OF 2013 TO: ALL CHIEF EXECUTIVES OF COMMERCIAL BANKS AND MORTGAGE FINANCE COMPANIES ISSUANCE OF PRUDENTIAL GUIDELINES ON INCIDENTAL BUSINESS ACTIVITIES AND NON-OPERATING HOLDING COMPANIES Pursuant to its mandate of fostering the liquidity, solvency and proper functioning of a stable market-based financial system, the Central Bank of Kenya has formulated the following two new Prudential Guidelines:

1. Incidental Business Activities (CBK/PG/23) - This guideline enables licenced institutions to provide a distribution channel for authorized financial services as part of an initiative to offer Kenyans a "one-stop shopping experience" where licenced institutions can offer various financial services under one roof; and 2. Non-Operating Holding Companies (CBK/PG/24) - This guideline enables non-operating holding companies to obtain control of an institution as part of an initiative to strengthen capital requirements at the consolidated level, reduce complexity of structures to enable effective consolidated supervision and to manage risks within the groups.

The Purpose Of This Circular Is Therefore To:

Issue the Prudential Guidelines on Incidental Business Activities and Non-Operating Holding Companies to all commercial banks and mortgage finance companies and to advise that the Guidelines will be effective from 1st October, 2013. The new Prudential Guidelines can be accessed on the Central Bank of Kenya website:http://www.centralbank.go.ke/index.php/regulations-and-guidelines. The aforementioned Guidelines are issued under section 33(4) of the Banking Act, and all institutions which opt to undertake activities set out under the Guidelines l should note that a breach of any of the Guidelines attracts remedial actions as specified under the Banking Act and Regulations made thereunder.

Mati MATU MUGO ASSISTANT DIRECTOR, BANK SUPERVISION 27th September 2013 Cc. Mr. Habil Olaka Chief Executive Officer Kenya Bankers Association International Life House Mama Ngina Street NAIROBI