BANKING CIRCULAR NO.6 OF 2016
TO CHIEF EXECUTIVES OF COMMERCIAL BANKS AND MORTGAGE
FINANCE COMPANIES
INCREASE OF CHARGES AND CONVERSION OF SAVINGS PRODUCTS TO
TRANSACTIONAL PRODUCTS
Since the Banking (Amendment) Act, 20 16 came into force on September 14, 20 16, the
Central Bank of Kenya (CBK) has received some applications from institutions seeking
approval to increase charges on their products. CBK has also received a number of
complaints from bank customers stating that their banks have imposed arbitrary charge s or
unilaterally converted their savings accounts into transactional accounts, and thereby losing
the benefits that were accruing from those savings accounts.
CBK hereby draws your attention to the requirements of the following provisions of the law:
i) Sections 16A (I ) and 44 of the Banking Act and Section 31A of the Banking
(Amendment) Act, 2016.
ii) Regulation 2 and 7 of the Banking (Increase of Rate of Banking and Other
Charges) Regulations, 2006.
iii) Clauses 3.2.3(a)( i), 3.2.9(a), 3.4.4(i) & (ii) and 3.4.6(a)( iii) of the Prudential
Guideline on Consumer Protection (CBKJPG/22).
These provisions provide for the following:
I) Savings, seven-day, call, and fixed deposit accounts should not attract any charge.
2) All products sought to be offered by any bank must be approved by CBK prior to
roll out.
3) Any proposed change to and/or in any feature of an approved product must be
approved by CBK. Each product has its own unique feature s. It is these features
that constitute the product, which must be approved by CBK. Approval by CBK of
a product means appro val of the feature s of the product as described by an
institution to the CBK. Any change in the features of the product changes the
product as earlier approved and therefore the changed product with less. more or
otherwise varied feature(s ) must be approved by CBK prior to rollout.
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4) Any charges on any product must be approved by CBK.
5) Any increase in charges on any product must be approved by CBK.
6) Institutions are required to exp lain to their customers the reasons behind any
decision to vary charges or terms & conditions of a contract.
7) Institutions are required to notify their customers within a reasonable time
(preferably one month) prior to varying any charges.
8) Institutions must disclose to their customers the total cost of credit.
We draw your attention to the following :
i) Any change of and/or in any feature of an approved product without the prior
approval of CBK is illegal.
ii) A savings, seven-day, ca ll or fixed deposit account product which by law does not
attract any charge cannot be converted to a transaction account (which may attract
charges) without the prior consent of the customer and without the prior approval
of CBK.
iii) Institutions need to amend their respective contracts with their customers to
incorporate the new legal requirements on disclosure of charges and terms.
iv) Any changes which may have been effected by institutions without the requisite
CBK approval should be reversed immediately.
v) Any conversion of a savings, seven-day , call or fixed deposit account product to a
transaction account which may have been effected by any institution should be
reversed immediately.
CBK will follow up, on a case by case basis, with any institution which may have violated
the law relating to approval of charges and products and appropriate action shall be taken
against the affec ted institution.
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In case of any query or clarification, please contact:
Th e Director,
Bank Supervision Department
Central Bank of Kenya
P.O. Box 60000 - 00200
NAIROBI
Tel: 2863005
Email:
fin@centralbank.go.keGERAlJYAOMA
DIRECTOR, BANK SUPERVISION
Cc: Chief Executive Officer
Kenya Bankers Association
13th Floor, International Life House
Mama Ngina Street
NAIROBI
“You can get in way more trouble with a good idea than a bad idea, because you forget that the good idea has limits.” - Ben Graham