Welcome to the latest issue of the Banking and Finance/Real Estate and Construction newsletter, where we bring you insightful articles and updates from Bowmans. We hope you find these articles both enlightening and enjoyable.
Lifting of moratorium on licencing of banks by Dominic Indokhomi, Kennedy Makau
The Central Bank of Kenya (CBK) will lift the nearly 10-year moratorium on the licensing of new commercial banks effective 1 July 2025, following improvements in governance, risk management, and the regulatory framework within the banking sector. The moratorium, which was imposed in 2015, led to mergers and acquisitions involving existing licensees, among other things reducing the number of commercial banks from 42 in 2016 to 38. Changes in the banking sector, such as the increase in minimum core capital requirements for banks to KES 10 billion, have strengthened the sector. The lifting of the moratorium is expected to increase competition, attract new entrants, and potentially result in more mergers between existing licensees, leading to a more resilient and innovative banking environment. Additionally, the new regulatory framework may encourage large non-bank credit providers to seek banking licenses, further reshaping the industry.
Be careful what you agree to over email – It could be legally binding by Cornelius Kigera, Michelle Kariuki
A recent ruling by Kenya’s Court of Appeal has reinforced a key legal principle in today’s digital age: email correspondence can create legally binding contracts. In this case, a dispute arose after the Respondent agreed, by email, to the Appellant’s internal currency conversion rate of 0.18%. The Respondent later claimed that a rate of 1.18% should have been used as this was the prevailing Central Bank of Kenya’s rate at the time. The Court of Appeal found that the parties had agreed to the conversion rate of 0.18% by email, with no reference to the prevailing Central Bank of Kenya rate. The Court of Appeal held that the email correspondence between the parties constituted a legally binding contractual agreement and that the courts would not rewrite contractual agreements made between parties.
This judgment serves as a crucial reminder: if you do not intend for an email exchange to be contractually binding, you must make that clear in your correspondence. While this ruling does not extend to transactions involving the disposition of an interest in land (which, under the Law of Contract Act, must be signed and in writing), it has wide-reaching implications for commercial dealings. A disposition of an interest in land is defined to include a transfer and a device, bequest or appointment of property contained in a will. A transfer is defined to include, amongst other things, a charge, lease and conveyance.
Review of the Risk-Based Credit Pricing Model by Dominic Indokhomi, Cynthia Amutete, Nathaniel Wairioko Nduta
The Central Bank of Kenya is proposing to change the pricing model for commercial banks in Kenya from the Risk-Based Credit Pricing Model to a new model where the lending rate will be the aggregate of the policy rate (Central Bank Rate) and a premium (“K”). The premium (“K”) will be comprised of the bank’s operating cost, return to shareholders and the borrower’s risk premium.
Commercial banks and the public are invited to provide their comments on the proposed pricing model to the CBK by Friday, 2 May 2025.
If you require any further information or have any queries, please do not hesitate to contact the authors captured in the articles or your usual relationship partner at Bowmans.
