give extensive thought to the treatment of unrated claims, given that the penetration of external ratings remains low in most countries. it is difficult to avoid creating incentives to remain unrated while at the same time retaining continuity with the existing accord ’ s treatment for these credits. further work would be needed to develop a standard for unrated claims that would be more risk - reflective but, unfortunately, few commentators offered significant suggestions in this regard. procyclicality the committee has considered what some observers have noted is the potential for introducing greater cyclicality in a more risk - sensitive capital framework. that is, the capital requirements for loans to troubled borrowers will tend to increase at just the point when such trouble is becoming apparent. this is an important point, and one that must be given serious consideration. it is my view that the global financial system needs to move toward addressing potential credit problems preemptively before these problems have time to grow from minor disturbances to major disruptions. a more risksensitive capital framework should help ensure that banks hold appropriate capital behind high - risk credits in the first place, and thus reduce the tendency for accentuating the need for capital after problems arise with such loans. credit risk mitigation techniques greater recognition of the benefits of risk mitigation techniques - such as collateral, guarantees, credit derivatives and netting - also is at the forefront of the committee ’ s work in revising the accord. in january of last year, the committee held consultations with over 50 banks and industry associations within the g10 on their methods for mitigating credit risk. we are now evaluating how to incorporate the risk - reducing benefits of the best of these practices, while at the same time addressing potential risks that remain from their use. as we finalize our proposals for making capital charges reflective of risk mitigation techniques, we are striving to find the right balance between recognizing a material reduction of risk with a structure that is applicable beyond internationally - active banks to both domestic and non - g10 banks. while we recognize that the treatment of credit risk mitigation techniques might differ in some respects between the standardized and the internal ratings - based approaches, we want to ensure a high degree of consistency between the two. interest rate and other risks the committee recognizes that in refining the measurement of credit risk, we should also take the opportunity to explore the potential coverage of other important risks, such as interest rate risk in the banking book and operational risk. for interest rate risk, we

interest rates — why this time will be different dr. patrick njoroge the battle for affordable credit went into high gear with the introduction of interest rate caps on september 14, 2016. this followed long - standing concerns about the high interest rates charged by commercial banks, their poor customer service and perceived insensitivity. three years later, the caps have been repealed and the verdict is clear — there are winners and losers. those that had borrowed at high rates ( above cbr + 4 percent ) had a bonanza. however, for the majority of potential borrowers and the most vulnerable, bank credit was unavailable. micro small and medium - size enterprises ( msmes ) were shut out and had to contend with shylocks at highly unfavorable terms. certainly this did not engender shared prosperity among kenyans. but the lingering question is whether banks will now roll back to their old ways, or will they strive to build a banking sector that works for and with all kenyans. will they react with courage and hope for the future, or roll back to mistrust and caution? the central bank of kenya ( cbk ) has set the pace by defining a clear vision of a banking sector that is responsible, disciplined and aligned to customers ’ needs. four pillars underpin this vision : risk - based credit pricing, transparency, customer centricity, and entrenching an ethical culture in banks. pricing — loans should be priced responsibly based on the customer ’ s risk profile and all positive and negative information from credit reference bureaus ( crbs ). the credit information sharing ( cis ) mechanism has recently been improved and work is ongoing to enhance it further, e. g., increasing the sources of information, enhancing the frequency and integrity of the data reported to crbs, and training of bank staff. transparency — banks need to fully and widely disclose the pricing ( all charges and fees ) of their products. to this end, the cost of credit website and a mobile app that enable customers to “ window shop ” for personal loans and mortgages were launched in 2017. further improvements are needed to incorporate more products and improve the overall customer experience. customer centricity — banks need to be aligned to the needs of their customers, including tailoring products that best serve customers ’ needs and resolving swiftly customers ’ complaints. for instance, banks recently showcased products that were tailored to the unique conditions of msmes. ethical culture — customers have perceived the high