We are alert, assures CBK

October 15, 2008

, NAIROBI, October 15 – The Central Bank of Kenya (CBK) on Wednesday said it had strengthened its surveillance on local banks in order to detect any adverse effects from the on-going global financial crisis.

CBK Director of Bank Supervision Rose Detho said that the regulator would issue a comprehensive report on the situation in coming days.

“So far we have not seen any signals that would show adverse effects in the banking sector.  We have up stepped our surveillance so that should there be any signals, we’ll put efforts together to see how we can best address it,” she said.

Noting that inflationary pressures could be contributing to the rising rates of loan defaults, Ms Detho said the regulator now required banks to continuously report on their non-performing loans in order to avert crises.

“That is a risk mitigating measure and if a bank is able to recognise a future loss, and start to manage it early through provisions, the better for all of us,” said Ms Detho.

Ms Detho who spoke while releasing a survey on bank charges and lending rates, also urged the public to use the reports to make informed decisions when buying into any financial services.

“As a consumer when you go to your bank to acquire a loan, insist on negotiating for what suits you as opposed to just accepting the bank proposals otherwise this report will not be of value to you,” she stressed.

At the same time Ms Detho also indicated that a study was currently underway on the possible adoption of the Annual Percentage Rate (APR) – an all inclusive measure of the cost of credit.

“The study report with recommendations is expected to be completed by the end of the year. Wide consultations will be held with various market players to get buy-in of the recommendations in the report before they are implemented,” she said.

The CBK has been under constant pressure to inform the public on the actual cost of acquiring loans for consumers to enable them to make more informed decisions.

This is the second year the bank is releasing this survey which was carried out by Research International with the intention of compiling a booklet that consumers can use to select the appropriate bank to open an account that suits there needs in relation to bank charges and lending rates.

Meanwhile Ms Detho underscored the importance of enhancing the financial education levels in the country revealing that the bank is supporting the Financial Education Partnership that has been recently constituted between the bank and the private sector.

She said the initial outputs of this partnership should begin to crystallise early next year.

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