Regulatory Alerts2018-01-01
Added · Updated
Financial Services (Credit Risk Management for Development Finance Institutions) Directive, 2018
The Registrar of Financial Institutions establishes credit risk management requirements for development finance institutions, mandating board approval of all credit facilities and the adoption of written policies covering lending criteria, interest rate risk, and collateral valuation. The directive defines specific classification categories for non-performing credits based on days overdue—ranging from standard to loss—and requires quarterly portfolio reviews, annual internal audits, and immediate write-off of facilities classified as loss in the subsequent quarter. It imposes strict provisioning rules, including a 100% provision for loss assets and specific percentages for doubtful or substandard facilities, while restricting single-borrower exposure to 25% of core capital and prohibiting overdrafts. Violations subject institutions to monetary penalties up to K50,000,000 and senior management fines up to K10,000,000, alongside potential qualification of financial statements by external auditors.
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