Banking Circular No 3 of 2010 - Roll Out of Credit Information Sharing Under the Banking Act

BANK!

KUUYA KENYA I CENTRAL BANK OF KENYA Haile Selassie Avenue P. O. Box 60000 - 00200 Nairobi, Kenya Telephone: 2860000, Fax: 340192

Bankingcircularno.3 Of2010

TO CHIEF EXECUTIVESOF COMMERCIALBANKS, INSTITUTIONSANDMORTGAGEFINANCECOMPANIES NON-BANK FINANCIAL

Rollout Ofcreditinformationsharingunderthebankingact

The Banking(Credit ReferenceBureau)Regulations,2008 (CRBRegulations)weregazetted on I Ith July2008 and cameinto operation on 2ndFebruary2009. TheCRBRegulations amongstothers provide for the establishment,licensingand operationsof banking sector Credit ReferenceBureaus(CRBs);oversightby the Central Bankon the operationsof CRBs and providefor the responsibilitiesof institutionsandCRBsin the credit informationsharing mechanism.Consequently,the CentralBankhasso far licensedonecredit referencebureau while threeother applicationsare at variousstagesof processing.licensedCRBswill collect, collateand,sharecredit informationwith institutionslicensedunderthe BankingAct.

Credit information sharing offers Kenya an opportunity to promote accessto affordable credit to moreKenyansbecauseinformation symmetrylowersthe risk premiumand search , costsloadedin the cost of credit. In the past,bankshaveloadeda Itrisk premium" to borrowersbecauseof lack of information.It is thereforethe CentralBank'sexpectationthat savingsarising from the sharingof credit information shalltranslateto lower cost of credit and in turn, moreKenyanswill beableto accesscredit from institutions. Credit information sharing will also facilitate the developmentof information capital. The information capital will support credit growth and financial developmentin Kenyain line with Vision 2030. The existing state of information asymmetrybetweenborrowersand banksisa constraintto innovationandfinancialintermediation. In line with Regulation14(4) of the CRBRegulations,the bankingindustry underthe aegis of the Kenya BankersAssociation has developedand agreed on a Data Specification Documentand Data StandardsManual (standardisedreporting template)for submissionof customerinformation to licensedCRBs.The requisiteinformation technology systemhas alreadybeendevelopedto enabletransmissionof data by institutionsto the CRBs. Thepurposeof this Circularis therefore:- , I. To formally bring into operation the credit information sharing mechanism for institutionslicensedunder the BankingAct and to notify you that the effectiverollout date for the mechanism shall be 3 Ist July 20 IO.

2. To informyou that effective3 Ist July 20 I0, all institutions shall be required to submit to all licensed CRBs,credit information described in Regulation 14(I) of the Banking (Credit Reference Bureau) Regulations, 2008. Institutions may also submit from 31st July 20 I0 to all licensed CRBs, credit information that may be exchanged pursuant to Regulation 14(2) of the Banking (Credit ReferenceBureau) Regulations, 2008.

3. To notify you that the reporting date for all non-performing loans shall be the last date of ~ each month effective31st July 20 IO. Institutionsshallsubmit customerinformationon all non-performingloans in their books as at 31st July 20 IQ to all licensedCRBs.Such information should be submitted to the licensed CRBsnot later than lOthAugust 20 I0 and thereafter incremental data on non-performing loans and other information that may be exchanged pursuant to the Banking (Credit ReferenceBureau) Regulations, 2008 shall be submitted on a monthly basis on or before the lOthday of each succeeding month.

4 . To require institutions to submit customer information to the CRBsusing the agreed Data Specification Document, a copy of which is currently available on the Central Bank of Kenya website at http://www.centralbank.go.ke.

5. Inform you that failure to comply with the reporting requirements or any other provision of the CRB Regulations will attract remedial action as specified under the Banking Act and the Banking (Credit ReferenceBureau) Regulations, 2008.

,- ..

F. P. K:PERE DIRECTOR. BANKSUPERVISION

12Thjuly 2010

cc. Chief Executive Officer Kenya Bankers Association Transnational Plaza NAIROBI.

Managing Director Credit Reference Bureau Africa Ltd.

Prosperity House, Westlands Road NAIROBI