talking points for the presentation on section 33c of the banking act national assembly departmental committee on finance and national planning dr. patrick njoroge, governor, central bank of kenya february 26, 2019 hon. members, i am delighted to appear today before this departmental committee on finance and national planning. i am grateful to you for the flexibility you allowed in arranging this meeting. at the outset. i want to make three points. first, i acknowledge the letters i received in the recent past requesting me to appear before this committee. i want to state our desire to meet with you, only that the scheduling did not allow this to happen sooner as i indicated in my replies. in replying to the letter of february 5, 2018, i indicated our desire to appear before the committee as soon as we could, and i also answered some of the questions. hon. members, i am prepared to address the remaining concerns. kulingana na methali “ mgeni njoo, mwenyeji apone ”. second, i want to assure hon. members that the central bank of kenya ( cbk ) serves the public interest. everything we do is according to its mandate, ultimately for the prosperity of all kenyans. on the specific questions, we are responding to the current challenges which are not only national but global — terrorism, money laundering, and corruption — and whose consequences are dire. third, we serve always and everywhere in accordance with the constitution and all applicable laws. nevertheless, a collaborative effort with all bodies is called for. in particular, we appreciate the national assembly ’ s role and welcome its support. if you will allow me, hon. members, i will now explain the recent amendment to the banking act, ( section 33c ) how cbk has acted to implement it, the difficulties in implementing this amendment, and what is at stake. i will also explain the background to cbk ’ s circular on large cash transactions. you will see that, as never before, we are looking over the edge of an abyss. the economy has taken many blows over the years and proved resilient. this one though would be self - inflicted. * * * on october 1, 2018, following the coming into force of section 65 of the finance act ( 2018 ) the banking act was amended to include a new section 33c. in one stroke, kenya was on the brink of rolling back key instruments in the fight against corruption, money laundering, and financing of terrorism, bringing

implementation of state - guaranteed loans : to date, 559, 000 requests have been received for a total of eur 105 billion, of which eur 85 billion have already been granted. in france, loans have therefore been rapidly channelled to vses and smes, in contrast with the difficulties seen in italy, the united kingdom and the united states. bernard delas will come back to the measures taken by insurers, but let me just highlight the acpr ’ s work on the conditions for the payment of compensation for loss of earnings, in order to better identify the challenges faced by the industry. 2. 2 a responsive monetary policy since this morning we have been in the silent period, so i shall limit myself to some retrospective remarks on monetary policy. i have often stressed that monetary policy is not made for the banks, but rather for the entire economy. and the banks have often been overly critical of monetary policy, holding it responsible for all their ills. i therefore think it is all the more important to stress that the ecb ’ s recent decisions, in the face of the crisis, have aimed to preserve the effective transmission of monetary policy via the bank channel : the conditions for tltro - iiis, these targeted longer - term refinancing operations, have been significantly eased ( up to 50 percentage points lower than the deposit facility rate if the target for lending during the “ covid period ” is reached, or currently – 1 % ). this radical innovation represents a reduction of several billion euros in annual costs for the european banking system. new operations have also been announced ( bridge ltros, peltros or pandemic emergency longer - term refinancing operations ). since the implementation of these measures, the outstanding amount of refinancing provided by the eurosystem to euro area banks has increased sharply, to more than eur 1, 000 billion, even before the june tltro. the easing of the collateral framework, for its part, has significantly increased the amount of assets eligible for operations, and supported the supply of credit to the private sector. first, by expanding the use of credit claims ( bank loans ) as collateral. but also by temporarily lowering the haircut applied to collateral by 20 percentage points for all assets ( and by an additional 20 percentage points for credit claims ), or by increasing from 2. 5 % to 10 % the maximum share of unsecured bank debt securities in a credit institution ’ s 2