The new law establishes a clear legal distinction between the Central Bank of Kenya's routine monetary policy operations and emergency liquidity support (ELA). This creates a special framework for solving problems during periods of financial instability while protecting public resources.
The reforms are designed to increase Kenya's preparedness for financial shocks by ensuring that emergency support is provided only under clearly defined circumstances. «The new law introduces a separate legal framework separating the Central Bank's routine monetary policy operations from emergency liquidity support (ELA). This step will improve Kenya's preparedness to respond to financial crises while protecting taxpayers and the banking sector», he said after signing the bill.
According to the amendments, emergency liquidity will be available only to those financial institutions that meet strict requirements regarding solvency, long-term viability and systemic importance. «According to the amendment, ELA can only be granted to banks that meet strict conditions for solvency, viability and systemic risk. This provision is aimed at separating normal liquidity management from emergency measures in times of financial stress», he said.
The legislation also expands the Central Bank's mandate by officially recognizing the stability of the financial system and sound banking regulation as secondary objectives, while maintaining price stability as a primary responsibility. This reinforces the regulator's role in ensuring the integrity, sustainability and proper functioning of the Kenyan financial sector.
Management reforms are also an important feature of the new law: President Ruto confirmed that «candidates for the positions of deputy governors will now be reviewed and approved by the National Assembly before appointment. This provision brings their appointment process in line with the process of appointing the governor and strengthens parliamentary control over the top management of the monetary authority».
The Act grants legislative recognition to the Central Bank of Kenya's Institute for Monetary Research, creating a legal framework for the institution's educational role and facilitating collaboration with regional and international partners to strengthen research, professional development, and knowledge sharing. Another amendment brings the Central Bank Act in line with Kenya's current financial architecture, replacing references to the former Deposit Protection Fund Board with the Kenya Deposit Insurance Corporation. The legislation clarifies the powers of the Central Bank to store and trade gold and other precious metals as part of reserve management. «It also expands the legal clarity regarding the authority of the Central Bank for operations with gold and other precious metals in the framework of reserve management. This will support the growth of Kenya's mining sector and bring Kenya closer to the practices of Tanzania, Ghana and South Africa».
At the same time, President Ruto signed the Parliamentary Pensions (Amendment) Bill 2023, which updates Kenya's parliamentary pension system to reflect the country's bicameral parliament, established under the 2010 Constitution. The new law officially extends pension benefits to members of both the National Assembly and the Senate, ensuring that senators are covered by the same legal framework as members of Parliament.
Key reforms include raising the legal definition of a child eligible for benefits from 16 to 18 years old in accordance with the Constitution, as well as reorganizing the Parliamentary Pensions Management Committee and the Appeals Committee to include representatives from both houses of Parliament.
The law also preserves the existing policy of state pension payments, retaining severance payments only for legislators who have worked for less than five years. The Head of State noted that the legislative changes are designed to strengthen financial management, modernize Kenya's monetary policy system and bring government institutions in line with constitutional and international best practices.
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