CENTRAL BANK OF KENYA
Remarks by
PROF. NJUGUNA NDUNG’U
GOVERNOR
Sarova Stanley Hotel, Nairobi
Tuesday, 27th January 2015

Ms. Rose Mambo, Chief Executive, Central Depository &
Settlement Corporation;
Mr. Paul Muthaura, Ag. Chief Executive, Capital Markets
Authority;
Mr. Andrew Wachira, Acting Chief Executive, Nairobi
Securities Exchange;
Chief Executives of the Central Depository Agents;
Chief Executive, Kenya Bankers Association;
CEOs of Commercial Banks here present;
Chief Executive, Kenya Association of Stockbrokers &
Investment Banks;
Distinguished Participants;
Ladies and Gentlemen:
I am pleased to join you today on this auspicious occasion to
launch the Settlement System for Equities and Corporate Bonds
through the Real Time Gross Settlement platform of the Central
Bank of Kenya, commonly referred to as KEPSS. At the outset, I
congratulate the technical teams from the CDSC, CMA and CBK
that ensured the success of this process.
Ladies and Gentlemen: We are gathered here today to celebrate
another milestone in the development of Kenya’s financial
markets and the developments in the payment systems. As you
are all aware, the financial landscape has changed
considerably in Kenya and the countries in the region. For the
region to attract foreign investors and deepen its markets, there

is need to enhance our financial markets systems and processes
to meet international standards. In this regard, I wish to
recognize the East African Community (EAC) Financial Sector
Development Regionalization Project (FSDRP), for spearheading
an assessment of EAC Partner States’ compliance to the
International Organization of Securities Commissions (IOSCO)
objectives and principles of securities regulation, particularly
Principle 38 on clearing and settlement.
The project assessed the levels of development of the securities
markets payments and settlement system as well as existing
capacity to comply with principle 38, and developed action
plans for compliance with the principle of Delivery Versus
Payment (DvP) that formed the basis for the current
developments.
Ladies and Gentlemen: Kenya’s development blueprint, Vision
2030, envisages a financial sector that is vibrant and globally
competitive in driving high levels of savings and financing the
country’s investment needs. To achieve this goal, the Clearing
and Settlement systems should be subject to regulatory and
supervisory requirements that are designed to ensure that they
are fair, effective and efficient while reducing credit,
settlement and the possibility of systemic risk. This partnership
between CDSC, CMA and CBK is not only an opportunity for

CDSC to meet the needs of its customers but also contributes in
addressing systemic risks in the settlement of securities. But it
is also important that the payment and settlement system and
the infrastructure that accompanies it is the driving force in
financial markets today.
Ladies and Gentlemen: We implemented a Real Time Gross
Settlement System in 2005, a development that significantly
enhanced efficiency in the settlement of payments to ‘Real
Time’ basis. In addition, one of the greatest payments
innovations of our time is the mobile phone money revolution;
Kenya was the first country in Africa to introduce Mobile
Money Financial Services. We later introduced the Cheque
Truncation System in the clearing of cheques, reducing the
clearing cycle from T+7 to T+1. Today we witness yet another
momentous milestone where equities and corporate bonds
traded at the Nairobi Securities Exchange (NSE) will
henceforth be settled through KEPSS at the Central Bank. This
landmark accomplishment is one that is fraught with
immediate and future benefits that I shall allude to shortly.
Ladies and Gentlemen: KEPSS is a systemically important
payment and settlement system drawing participation from 41
local commercial banks. The modernization of KEPSS has
incorporated regional payment systems - the East African

Payment System (EAPS) for EAC and the Regional Electronic
Payment and Settlement System (REPSS) for COMESA countries.
Indeed, it is a very secure payment system that delivers
financial settlements in real time using SWIFT as the message
carrier. During the year 2014, KEPSS successfully settled 2.5
million transactions valued at Ksh.25.6 trillion; which is to
say it clears more than 10,000 transactions worth over Ksh.100
billion on a daily basis. These figures in themselves tell the
story of success and so more enhancement will provide the
platform for more success.
Ladies and Gentlemen: The Central Bank has expended
substantial amounts of time and energy developing the
building blocks and enabling environment for clearing and
settlement of transactions to flow freely. The KEPSS platform
will allow local, intra-regional and inter-regional trade to
progress efficiently and cost effectively. I am happy to note that
CDSC will be joining this settlement community, a development
that presents an opportunity for expanding the scope and reach
of KEPSS. Let me reiterate that KEPSS simplifies payment
processes as well as enabling cross border payment and transfer
of value within the region in an easier, safer and more
efficient way.

Ladies and Gentlemen: In a new system and a new way of
doing business, better is always resisted – we went through the
same motion with the cheque truncation system. I challenge the
Central Depository Agents to impress upon their clients the
immense benefits accruing from the use of the KEPSS for
settlement of NSE transactions. These benefits include:
Enhanced efficiency in the settlement process and risk
control mechanisms;
Enhanced safety through use of the SWIFT infrastructure;
Increased accessibility through commercial banks;
Improved investor confidence leading to increased
activities at the NSE;
An efficient audit trail.
Today’s launch therefore marks another milestone in
revolutionising the payments ecosystem in Kenya and in
particular in the Securities Exchange market. The system
successfully went live on 15th January with the settlement of
transactions concluded at the Nairobi Securities Exchange
(NSE) being executed through the Central Bank’s KEPSS system.
Therefore, as we celebrate with the CDSC, CMA, NSE and
indeed the entire capital markets fraternity, we are also
affirming the potential for more innovativeness and
enhancement of safety and efficiency through collaborations

and innovation in payment and settlement systems. In doing so,
we shall play our role in enabling the attainment of the
national economic goals envisaged under Vision 2030.
Distinguished Guests, Ladies and Gentlemen: Let me conclude
my remarks by emphasising the important role that an
efficient settlements system plays in enhancing the deepening of
capital markets. As Kenya aspires to become a regional and
international financial centre, the centrality of efficient
payments and settlements system cannot be gainsaid. The model
we are about to launch is one more step towards achieving that
goal.
THANK YOU