Regulatory Alerts2019-02-28
Kenya Banking Sector Charter - 2019
The Banking Sector Charter seeks to transform the banking industry into one that promotes transparency, responsible pricing, customer-centric models and ethical culture. It introduces several key provisions including: 1. Transparent pricing of all banking products through the cost of credit report. This report provides a clear breakdown of costs involved in obtaining financial services. Institutions are required to publish this information on their websites. 2. Credit scoring will be based on fair, objective and non-discriminatory criteria. This ensures that customers are assessed fairly without bias or discrimination. 3. Cooling-off periods will be introduced for loan products with terms of one year or less. These periods allow consumers to cancel agreements without incurring penalties. 4. Credit information sharing among institutions is encouraged. Sharing credit data enables institutions to make more informed decisions when extending loans, thus reducing the risk of default. 5. Customer-centric models prioritize customer satisfaction and are expected to lead to more profitable relationships between banks and their clients. Institutions must submit a plan outlining how they will implement these models by May 31, 2019. 6. A complaint resolution mechanism is established, giving customers avenues to address grievances against financial institutions effectively. 7. Mystery shopping surveys will be conducted periodically to evaluate the level of compliance with the charter provisions. 8. Institutions are required to submit a quarterly report on their progress in implementing the charter. Non-compliance may result in monetary penalties or administrative actions. By enforcing these provisions, the Banking Sector Charter aims to foster fair competition, improve customer service, and enhance overall market integrity in Kenya's banking sector. Institutions that fail to adhere to the charter's guidelines risk facing significant consequences, including financial penalties and administrative actions taken by the Central Bank of Kenya.