Financial Regulation International
Shaping the future of banking and regulatory oversight in Kenya
Perspectives from Stanbic Bank Kenya Ltd v Santowels Ltd
by Olive Chege
Contractual freedom has been the epicentre of contract engagement between banks and their customers in Kenya. Based on the
needs of a client and the bank's risk appetite, banks dictate the terms of engagement when advancing loan facilities, including
the amount payable as interest. Whereas this control has been discretional and without the regulator's pre-approval, a recent
Supreme Court of Kenya judgment, issued on 28 June 2024,
1 is a crucial development in expanding the Central Bank of Kenya's macro-prudential role. The detail and implications of the
decision need to be fully understood by policymakers, the bank's senior management, and financial market stakeholders. With
the aim of providing clarity in interpretation to what encompasses the "rate of banking" and "other charges" outlined in section
44 of the Banking Act Kenya,
2 this landmark judgment now mandates all banks and financial institutions to seek the approval of the Cabinet secretary responsible
for finance matters before increasing their interest rates on loans.