Central Bank of Kenya (CBK) has ordered local banks to stop charging customers new transaction fees following the implementation of the interest rates cap law.
The CBK director in charge of Bank Supervision Gerald Nyaoma says in a circular to chief executives of commercial banks and mortgage finance companies that the regulator has in recent weeks received numerous applications from banking institutions seeking approval to increase charges on products.
The letter, dated October 3, also says that the CBK has received mounting complaints over ongoing introduction of new arbitrary charges since the Banking (Amendment) Act 2016 came into force on September 14, whose effect is to nullify any gains to customers of the new law capping interest rates.
“The CBK has also received a number of complaints from bank customers stating that their banks have imposed arbitrary charges or unilaterally converted their savings accounts into transactional accounts, and thereby losing the benefits that were accruing from their savings accounts,” Mr Nyaoma says in the circular.
The letter, which is copied to Kenya Bankers Association (KBA) chief executive Habil Olaka, declares the new fees illegal, and reminds bank CEOs that any change in any feature of an approved product without prior approval of CBK is also illegal, adding that any bank executive acting in breach of the law faces hefty fines and sanctions, including loss of operating licences.
“Any changes which may have been effected by institutions without the requisite CBK approval should be reversed immediately,” the circular says – meaning banks that have converted their customers’ savings accounts into current accounts must reverse the action.
“Any conversion of a savings, seven-day or fixed deposit account product to a transaction account by any institution should be reversed immediately.”
Mr Nyaoma says banks and institutions that violate the new law will face harsh sanctions including hefty fines and even loss of bank licenses.
