The proposed changes in banking laws will also see banks and CRBs penalized to the tune of Sh3 million for non-compliance with CBK directives.

“The Bill seeks to amend the Banking Act to provide for stricter sanctions against banking institutions and credit reference bureaus that fail to comply with prudential guidelines issued by the Central Bank (of Kenya) ” said Mr Mbadi in a notice published in newspapers on Friday. , explaining the policy measures in the proposed amendments to business laws that will be tabled in the National Assembly.

“The bill proposes to introduce a penalty of three million (shillings) for legal entities and one million (shillings) for individuals.”

Article 33(4) of the Banking Law authorizes the CBK to issue instructions to institutions “generally for the better exercise of its functions”.

These generally relate to the standards that banks and CRBs must follow when operating in Kenya or any other country where they are present, as well as guidelines to “maintain a stable and efficient banking and financial system”.

“A person who fails to comply with a direction under this section commits an offense and will, in addition to the penalty prescribed under section 49 (of the Banking Act), be liable to any additional penalty that may be prescribed, for each day or part. during which the offense continues,” the law reads.

This comes after CBK Governor Kamau Thugge blamed the light fines for continued violations of banking laws and guidelines.

“One of my first observations was that there seem to be a number of them (banks) that are not complying with certain provisions because of the weak sanctions. I suggested that we strengthen these sanctions,” Dr. Thugge said in an interview with Business daily in June.

“Tougher sanctions will bring a lot of sanity to the system, where banks will think twice before violating a central bank provision.”

The CBK also published draft Banking Regulations (Penalties) 2024 in mid-March providing for harsher fines which, once implemented, will replace existing ones implemented in 1999.

The proposed sanctions sought to introduce fines of between Sh2 million and Sh20 million for corporate entities and Sh1 million for individuals who fail or refuse to comply with instructions given by the CBK.

If passed, they will repeal the current sanctions which provide a maximum of 1 million shillings for an institution and 100,000 shillings for bank officials.

The regulations, which have been criticized for imposing blanket fines for all violations with little variation, also provide that the Minister of Finance “may prescribe additional penalties not exceeding Sh10,000 in each case for each day or part of day if such failure or refusal continues.”

The CBK has increased its monitoring and financial sanctions against violating banks and their employees in recent years, aiming to improve the stability of the sector after the collapse of three small lenders in 2015 and 2016. Rules have also been tightened to prevent cases of money laundering and terrorist financing.