Regulatory Alerts2011-08-12
Banking Circular No 6 of 2011 - Guidelines on the use of CBK Discount
This Banking Circular from the Central Bank of Kenya outlines updated guidelines on using the CBK Discount (Overnight) Window, in response to recent pressures on the foreign exchange market. Notable changes include: 1) Banks lending in the interbank market cannot access funds through the CBK Discount Window on the same day and must not lend in the interbank market on the day of accessing or the following day. 2) The interest rate charged at the Window is based on the Central Bank Rate (CBR) plus previous day's average interbank rate minus CBR, with a penalty of 3 percentage points; when the interbank rate equals or falls below the CBR, the rate will be the CBR plus 3 percentage points. 3) Banks' eligibility for access is assessed on their foreign exchange trading behavior over four previous days. The use of the reverse repo has been temporarily suspended, and banks are encouraged to consider the Horizontal Repo, offering varied tenors negotiated bilaterally between banks. This Circular takes effect from August 15th, 2011.