Central Bank of Kenya building in Nairobi /FILE
President William Ruto on Monday signed the Central Bank of Kenya (Amendment) Bill, 2026 into law, introducing major reforms to the banking sector.
The Central Bank of Kenya (Amendment) Bill, 2026 seeks to strengthen oversight of the country's banking sector by enhancing the Central Bank of Kenya's mandate, clarifying its intervention powers during financial distress and introducing additional accountability measures for senior leadership appointments.
The Bill, sponsored by Molo MP and Departmental Committee on Finance and National Planning chairperson Kuria Kimani, was forwarded to Ruto for assent after being passed by the National Assembly with amendments.
According to the National Assembly brief, the principal objective is to strengthen the statutory framework governing liquidity support by the Central Bank while clearly distinguishing routine monetary policy operations from emergency liquidity assistance provided during periods of financial distress.
It also seeks to provide legal clarity on the scope and limits of the Bank's intervention powers and establish prudential safeguards, including solvency, viability and systemic risk requirements, for the provision of emergency liquidity assistance.
One of the key changes in the legislation is the formal recognition of financial system stability and sound banking regulation as secondary objectives of the Central Bank.
The National Assembly said the amendments seek to expressly articulate financial system stability and sound banking regulation as objectives of the Bank without affecting its primary responsibility of maintaining price stability.
According to the brief, while price stability remains the Bank's primary objective, the law codifies the complementary role played by the Central Bank in promoting the integrity, resilience and proper functioning of Kenya's financial system.
The law also introduces a clearer distinction between routine liquidity operations and Emergency Liquidity Assistance (ELA).
The National Assembly said the amendments are intended to provide a clear statutory separation between liquidity operations undertaken by the Central Bank for routine monetary policy implementation and emergency support extended in exceptional circumstances to preserve financial stability.
"The amendment therefore averts interpretive ambiguity that may arise particularly in periods of financial stress, provides a clearer statutory separation between these distinct functions, reinforces appropriate safeguards, and aligns the framework with evolving financial stability imperatives and international best practice," the National Assembly said in the brief.
Another significant change contained in the law relates to the appointment of Deputy Governors of the Central Bank.
The law requires persons nominated for appointment as Deputy Governors to be approved by the National Assembly before taking office.
According to the National Assembly, the amendment seeks to align the appointment process with constitutional provisions assigning the national government responsibility over monetary policy, currency, banking, insurance and financial corporations.
The House said the change also aligns the approval process for Deputy Governors with that of the Governor of the Central Bank, whose appointment is already subject to parliamentary approval.
It further formalises the Central Bank's training and capacity-building functions.
The National Assembly noted that although the Central Bank has been offering training and capacity-building programmes through the Central Bank of Kenya Institute of Monetary Studies, the function is not currently anchored in law.
The amendment therefore provides a legal framework for internal, national and regional capacity building and collaboration, with the aim of enhancing knowledge dissemination, accountability and legal clarity.
The legislation also provides legal recognition for inter-governmental and cross-border cooperation as an official function of the Bank.
The law further introduces legal clarity regarding the Central Bank's powers to deal in gold and other precious metals.
According to the National Assembly, amendments to Section 27 of the Central Bank of Kenya Act are intended to ensure effective implementation of the Bank's powers to deal in gold and other precious metals as part of its reserve and market operations functions.
The House said the amendment is expected to support the local mining sector while aligning Kenya's regulatory framework with practices adopted in Tanzania, Ghana, the Democratic Republic of Congo and South Africa, as well as international best practice.
The law also updates outdated provisions within the Central Bank of Kenya Act.
The National Assembly said Section 46A of the Act will be amended by replacing references to the former Deposit Protection Fund Board with the Kenya Deposit Insurance Corporation, which was established under the Kenya Deposit Insurance Act.
According to the National Assembly, the overall effect of the amendments is to make the Central Bank of Kenya Act more responsive to the Bank's mandate in a changing financial environment, strengthen safeguards around emergency liquidity assistance, enhance oversight of senior appointments, support financial system stability and align the legal framework with the Basel Core Principles for Effective Banking Supervision and other relevant instruments.
