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Law Capping interest rates
Rank: Veteran Joined: 9/18/2014 Posts: 1,127
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Cde Monomotapa wrote:obiero wrote:Cde Monomotapa wrote:Viva!! ✊ Now, on this semblance of a rate cap review is that at the onset most savings accounts were made into transactional accounts to create spread, lower cost of funds. With this 0-14% band is still to watch the yield curve especially 91, 182, 364 day T-bills. Whether it will translate to Real economy private sector lending, maybe with 91 day T-bills at 4%, is a wait and see. Otherwise, it will just lower the cost of funding bloat & graft (GoK). True. Plus now that the deposits will be on chase, expect smaller banks to fall by the way side via high interest expense Contrarily, sector liqudity is at a record high circa 50% (prudential mininimum 20%). Thus, and with lending capped at 14%, liquidity will be rebalanced and savers will deposit with smaller, agile banks (lower overhead expenses; fintech) offering higher rates on savings than larger banks. Agreed. Some breathing room for the smaller banks. Average rate of return on savings will drop competitively and aid overall liquidity of the economy. I was afraid KE was boxing itself into an illiquid cul de sac with all those senseless regulations. The main purpose of the stock market is to make fools of as many people as possible.
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Rank: Veteran Joined: 9/18/2014 Posts: 1,127
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FRM2011 wrote:FRM2011 wrote:FRM2011 wrote:
Finance bill finally on the floor of the house. There are numerous amendments on the bill. Lets see how this goes.
Junet Mohamed passionately pushing for an extension of the VAT deadline to 2020. This would put on hold plans to charge VAT on petroleum products w.e.f 1st Sept 2018. PS: The speaker has ruled that the rate cap amendment cannot be discussed until treasury gives its input. Update from parliament; 1. MPs have debated and voted to retain rate capping on loans but removed the rate on savings. Worth noting the speaker had ruled the amendment cannot be discussed. 2. MPs have rejected the treasury's proposal to introduce a mandatory contribution to the national housing fund. 3. MPs have rejected the VAT on petroleum and extended the deadline to 1st Sept 2020. The logic behind the proposal to establish the national housing fund was baffling. The main purpose of the stock market is to make fools of as many people as possible.
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Rank: Elder Joined: 7/26/2007 Posts: 6,514
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Cde Monomotapa wrote:KulaRaha wrote:Cde Monomotapa wrote:obiero wrote:Cde Monomotapa wrote:Viva!! ✊ Now, on this semblance of a rate cap review is that at the onset most savings accounts were made into transactional accounts to create spread, lower cost of funds. With this 0-14% band is still to watch the yield curve especially 91, 182, 364 day T-bills. Whether it will translate to Real economy private sector lending, maybe with 91 day T-bills at 4%, is a wait and see. Otherwise, it will just lower the cost of funding bloat & graft (GoK). True. Plus now that the deposits will be on chase, expect smaller banks to fall by the way side via high interest expense Contrarily, sector liqudity is at a record high circa 50% (prudential mininimum 20%). Thus, and with lending capped at 14%, liquidity will be rebalanced and savers will deposit with smaller, agile banks (lower overhead expenses; fintech) offering higher rates on savings than larger banks. In Kenya, agile = risky. Lets see if folks still have appetite after the Chase/Imperial dramas. I doubt. We're talking listed banks here. DTB, NIC. A quick look at Cost of funds would show the difference would be nominal. I suspect depositors will get smaller returns industrywide if the floor is removed. Business opportunities are like buses,there's always another one coming
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Rank: Elder Joined: 7/23/2008 Posts: 3,017
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Overall, parliament did well, took decisions for their own benefits but ultimately also covered Wanjiku. The removal of floor rate for deposits is inconsequential as banks effective cost of funds is already less than 3%. Hope the bankers and govt will read the signs and let this go. Govt should instead cut costs and wastage while bankers can innovate and develop new business models aligned to the rate cap reality. "The purpose of bureaucracy is to compensate for incompetence and lack of discipline." James Collins
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Rank: Elder Joined: 6/2/2011 Posts: 4,818 Location: -1.2107, 36.8831
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lochaz-index wrote:FRM2011 wrote:FRM2011 wrote:FRM2011 wrote:
Finance bill finally on the floor of the house. There are numerous amendments on the bill. Lets see how this goes.
Junet Mohamed passionately pushing for an extension of the VAT deadline to 2020. This would put on hold plans to charge VAT on petroleum products w.e.f 1st Sept 2018. PS: The speaker has ruled that the rate cap amendment cannot be discussed until treasury gives its input. Update from parliament; 1. MPs have debated and voted to retain rate capping on loans but removed the rate on savings. Worth noting the speaker had ruled the amendment cannot be discussed. 2. MPs have rejected the treasury's proposal to introduce a mandatory contribution to the national housing fund. 3. MPs have rejected the VAT on petroleum and extended the deadline to 1st Sept 2020. The logic behind the proposal to establish the national housing fund was baffling. Someone thought of creating a looting basket. A fund like NHIF and NSSF. Receive with simplicity everything that happens to you.” ― Rashi
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Rank: Veteran Joined: 11/13/2015 Posts: 1,596
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wukan wrote:Ericsson wrote:wukan wrote:Like we said interest rates capping is not happening this year now linked to KBRR Quote:“Section 33B of the Banking Act is amended by deleting subsection (1) and substituting therefore the following new subsection,” read part of the Joseph Limo-led committee’s report tabled yesterday in Parliament. “A bank or financial institution shall set the maximum interest rate chargeable for a credit facility in Kenya at no more than four per cent above the base rate set and published by the KBRR.” The committee had resisted the Government’s and International Monetary Fund’s (IMF) aggressive push for the removal of the interest rate cap. This is a major to blow to banks that have been lobbying for the removal of the rate cap, arguing that credit available to micro, small and medium enterprises (MSMEs) has shrunk. Read more at: https://www.standardmedi...mps-retain-law-on-rates And there you have it. KBRR was previously what was being used plus a factor K that banks were at free will to set it. Now K has been set at 4% maximum. Next you will see KBRR rise to 12%. KBRR is also set by the banks. That was part of the discussion that KBRR is really a banker's tool so they plan to introduce further amendments on the floor on tuesday. I think only the cap on interest on deposits will go and the loan cap will be tied to CBR They actually went through with this  The flaws in this approach will be apparent later.
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Rank: Veteran Joined: 7/3/2007 Posts: 1,634
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wukan wrote:wukan wrote:[quote=Ericsson][quote=wukan]Like we said interest rates capping is not happening this year now linked to KBRR Quote:“Section 33B of the Banking Act is amended by deleting subsection (1) and substituting therefore the following new subsection,” read part of the Joseph Limo-led committee’s report tabled yesterday in Parliament. “A bank or financial institution shall set the maximum interest rate chargeable for a credit facility in Kenya at no more than four per cent above the base rate set and published by the KBRR.” The committee had resisted the Government’s and International Monetary Fund’s (IMF) aggressive push for the removal of the interest rate cap. This is a major to blow to banks that have been lobbying for the removal of the rate cap, arguing that credit available to micro, small and medium enterprises (MSMEs) has shrunk. Read more at: https://www.standardmedi...mps-retain-law-on-rates And there you have it. KBRR was previously what was being used plus a factor K that banks were at free will to set it. Now K has been set at 4% maximum. Next you will see KBRR rise to 12%. KBRR is also set by the banks. Not quite. KBBR, like CBR is based on known variables such as the moving average on 91 day treasury bond rates, the CBR rate itself etc. It also requires banks to be more transparent in communicating the cost of loans, which is good for Wanjiku. The main problem I see is that KBBR was binned some months back and has to be brought back. In the meantime, I don't know what that means for implementing the amended law. You can also expect Banks will have a keen interest in how it is reconstituted. They were caught napping when the Cap was introduced and it has cost them. It will not happen again. "The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth." (Niels Bohr)
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Rank: Elder Joined: 12/4/2009 Posts: 10,702 Location: NAIROBI
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Wakanyugi wrote:wukan wrote:wukan wrote:[quote=Ericsson][quote=wukan]Like we said interest rates capping is not happening this year now linked to KBRR Quote:“Section 33B of the Banking Act is amended by deleting subsection (1) and substituting therefore the following new subsection,” read part of the Joseph Limo-led committee’s report tabled yesterday in Parliament. “A bank or financial institution shall set the maximum interest rate chargeable for a credit facility in Kenya at no more than four per cent above the base rate set and published by the KBRR.” The committee had resisted the Government’s and International Monetary Fund’s (IMF) aggressive push for the removal of the interest rate cap. This is a major to blow to banks that have been lobbying for the removal of the rate cap, arguing that credit available to micro, small and medium enterprises (MSMEs) has shrunk. Read more at: https://www.standardmedi...mps-retain-law-on-rates And there you have it. KBRR was previously what was being used plus a factor K that banks were at free will to set it. Now K has been set at 4% maximum. Next you will see KBRR rise to 12%. KBRR is also set by the banks. Not quite. KBBR, like CBR is based on known variables such as the moving average on 91 day treasury bond rates, the CBR rate itself etc. It also requires banks to be more transparent in communicating the cost of loans, which is good for Wanjiku. The main problem I see is that KBBR was binned some months back and has to be brought back. In the meantime, I don't know what that means for implementing the amended law. You can also expect Banks will have a keen interest in how it is reconstituted. They were caught napping when the Cap was introduced and it has cost them. It will not happen again. Banks have won,Wanjiku has won. Bank interest margin has widened while wanjiku gets cheap loans Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
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Rank: Veteran Joined: 8/30/2007 Posts: 1,558 Location: Nairobi
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Ericsson wrote:Wakanyugi wrote:wukan wrote:wukan wrote:[quote=Ericsson][quote=wukan]Like we said interest rates capping is not happening this year now linked to KBRR Quote:“Section 33B of the Banking Act is amended by deleting subsection (1) and substituting therefore the following new subsection,” read part of the Joseph Limo-led committee’s report tabled yesterday in Parliament. “A bank or financial institution shall set the maximum interest rate chargeable for a credit facility in Kenya at no more than four per cent above the base rate set and published by the KBRR.” The committee had resisted the Government’s and International Monetary Fund’s (IMF) aggressive push for the removal of the interest rate cap. This is a major to blow to banks that have been lobbying for the removal of the rate cap, arguing that credit available to micro, small and medium enterprises (MSMEs) has shrunk. Read more at: https://www.standardmedi...mps-retain-law-on-rates And there you have it. KBRR was previously what was being used plus a factor K that banks were at free will to set it. Now K has been set at 4% maximum. Next you will see KBRR rise to 12%. KBRR is also set by the banks. Not quite. KBBR, like CBR is based on known variables such as the moving average on 91 day treasury bond rates, the CBR rate itself etc. It also requires banks to be more transparent in communicating the cost of loans, which is good for Wanjiku. The main problem I see is that KBBR was binned some months back and has to be brought back. In the meantime, I don't know what that means for implementing the amended law. You can also expect Banks will have a keen interest in how it is reconstituted. They were caught napping when the Cap was introduced and it has cost them. It will not happen again. Banks have won,Wanjiku has won. Bank interest margin has widened while wanjiku gets cheap loans Investors have also won, speculators maybe not so much. These price corrections were great!
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Rank: Elder Joined: 6/23/2009 Posts: 13,548 Location: nairobi
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Cde Monomotapa wrote:KulaRaha wrote:Cde Monomotapa wrote:obiero wrote:Cde Monomotapa wrote:Viva!! ✊ Now, on this semblance of a rate cap review is that at the onset most savings accounts were made into transactional accounts to create spread, lower cost of funds. With this 0-14% band is still to watch the yield curve especially 91, 182, 364 day T-bills. Whether it will translate to Real economy private sector lending, maybe with 91 day T-bills at 4%, is a wait and see. Otherwise, it will just lower the cost of funding bloat & graft (GoK). True. Plus now that the deposits will be on chase, expect smaller banks to fall by the way side via high interest expense Contrarily, sector liqudity is at a record high circa 50% (prudential mininimum 20%). Thus, and with lending capped at 14%, liquidity will be rebalanced and savers will deposit with smaller, agile banks (lower overhead expenses; fintech) offering higher rates on savings than larger banks. In Kenya, agile = risky. Lets see if folks still have appetite after the Chase/Imperial dramas. I doubt. We're talking listed banks here. DTB, NIC. Being listed counts for something but not everything.. Look at HF.. Even NIC lost deposits
HF 90,000 ABP 3.83; KQ 414,100 ABP 7.92; MTN 23,800 ABP 6.45
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Rank: Elder Joined: 10/18/2008 Posts: 3,434 Location: Kerugoya
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Can we now put this matter to rest and move on? Or will the Banking Mafia in Kenia, re-group and go back to the drawing board to "Revisit". What would be the best strategy to "fix" these Honorable Mpigs in this matter? Quote:Blow To Banks as MPs Vote to Retain the Interest Cap Law
By Soko Directory Team / August 31, 2018
Kenya’s Members of Parliament have voted to retain the interest capping law in a move that has dealt a blow to banks and the National Treasury.
The Treasury has been pushing for the amendment or the scrapping of the law which it said was unsustainable and that it was hurting the banking sector as well as the general economy.
The International Monetary Fund (IMF) has also called for the scrapping of the law saying that it was not healthy for a country that is already choking in debts.
The interest rate cap was introduced in September 2016 and was aimed at helping Kenyans and Small Medium Enterprises to have access to affordable loans from commercial banks.
The rate came into force at the time commercial banks had increased interest rates on loans to up to 28 percent, making it for thousands of Kenyans to access loans.
Despite the fact that the law was meant to help Kenyans access loans, banks retaliated by refraining from lending to ‘high risk’ customers especially the SMEs.
The SMEs have complained that ever since the law was passed, banks refused to lend to them and this was witnessed when the lending by commercial banks to the private sector dropped from 9.3 percent in 2016 to 2.4 percent in 2017.
Members of Parliament noted that the banks through the Central Bank of Kenya were ‘blackmailing’ Kenyans to make it look like the law was not working.
President Uhuru Kenyatta, who signed the cap into law said that it was unsustainable and called for its review but MPs turned down the request.
It was during the same session that MPs voted to suspend the implementation of the 16 percent Value Added Tax (VAT) on fuel that would have seen a liter of petrol retailing at a record high of more than 130 shillings. The VAT has now been moved to 1st of September 2020. Source Link
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Rank: Veteran Joined: 8/10/2014 Posts: 977 Location: Kenya
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Bank stocks getting crushed...Equity dropped from 50 to now at 45, KCB down to 45
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Rank: Veteran Joined: 4/4/2016 Posts: 1,997 Location: Kitale
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aemathenge wrote:Can we now put this matter to rest and move on? Or will the Banking Mafia in Kenia, re-group and go back to the drawing board to "Revisit". What would be the best strategy to "fix" these Honorable Mpigs in this matter? Quote:Blow To Banks as MPs Vote to Retain the Interest Cap Law
By Soko Directory Team / August 31, 2018
Kenya’s Members of Parliament have voted to retain the interest capping law in a move that has dealt a blow to banks and the National Treasury.
The Treasury has been pushing for the amendment or the scrapping of the law which it said was unsustainable and that it was hurting the banking sector as well as the general economy.
The International Monetary Fund (IMF) has also called for the scrapping of the law saying that it was not healthy for a country that is already choking in debts.
The interest rate cap was introduced in September 2016 and was aimed at helping Kenyans and Small Medium Enterprises to have access to affordable loans from commercial banks.
The rate came into force at the time commercial banks had increased interest rates on loans to up to 28 percent, making it for thousands of Kenyans to access loans.
Despite the fact that the law was meant to help Kenyans access loans, banks retaliated by refraining from lending to ‘high risk’ customers especially the SMEs.
The SMEs have complained that ever since the law was passed, banks refused to lend to them and this was witnessed when the lending by commercial banks to the private sector dropped from 9.3 percent in 2016 to 2.4 percent in 2017.
Members of Parliament noted that the banks through the Central Bank of Kenya were ‘blackmailing’ Kenyans to make it look like the law was not working.
President Uhuru Kenyatta, who signed the cap into law said that it was unsustainable and called for its review but MPs turned down the request.
It was during the same session that MPs voted to suspend the implementation of the 16 percent Value Added Tax (VAT) on fuel that would have seen a liter of petrol retailing at a record high of more than 130 shillings. The VAT has now been moved to 1st of September 2020. Source Link the mps have done this because of their numerous loans in all lending institutions.a very selfish decision.They dont care about the masses who elect them. Towards the goal of financial freedom
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Rank: Elder Joined: 10/18/2008 Posts: 3,434 Location: Kerugoya
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Ebenyo wrote:the mps have done this because of their numerous loans in all lending institutions.a very selfish decision.They dont care about the masses who elect them. That is the challenge. What is the solution?
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Rank: Elder Joined: 7/26/2007 Posts: 6,514
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aemathenge wrote:[quote=Ebenyo]the mps have done this because of their numerous loans in all lending institutions.a very selfish decision.They dont care about the masses who elect them.[/quote]
That is the challenge.
What is the solution? How will removal of the rate cap assist the masses? Business opportunities are like buses,there's always another one coming
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Rank: Member Joined: 8/19/2015 Posts: 125
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"Masses" don't be fooled that when banks will be allowed to lend at 20%-30% interest rate, they will be trooping at your door steps to give you unsecured loans. Forget it wont happen. Banks are blackmailing the Govt.
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Rank: Elder Joined: 4/22/2010 Posts: 11,522 Location: Nairobi
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KulaRaha wrote:aemathenge wrote:[quote=Ebenyo]the mps have done this because of their numerous loans in all lending institutions.a very selfish decision.They dont care about the masses who elect them.[/quote]
That is the challenge.
What is the solution? How will removal of the rate cap assist the masses? I am also waiting to hear this.... possunt quia posse videntur
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Rank: Elder Joined: 10/18/2008 Posts: 3,434 Location: Kerugoya
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Allow me to rephrase my queries. As a publicly quoted bank shareholder watching my "wealth" slither away because Mpigs won't play "ball", what should I demand of directors and management in their handling of the Mpigs? What should Kenya Bankers Association's next move be? The stumbling block between "wealth" creation and banking shareholders is Mpigs. What is the panacea?
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Rank: Elder Joined: 7/26/2007 Posts: 6,514
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Sir invest wrote:"Masses" don't be fooled that when banks will be allowed to lend at 20%-30% interest rate, they will be trooping at your door steps to give you unsecured loans. Forget it wont happen. Banks are blackmailing the Govt. The government is borrowing at 12.5% to 13% from banks. You are also trying to borrow at the same rate from banks. Who is spoiling your chances of borrowing? Is it the banks who have choices who to lend to, or the government, who is competing with you? Be woke... Business opportunities are like buses,there's always another one coming
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Rank: Elder Joined: 7/21/2010 Posts: 6,183 Location: nairobi
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aemathenge wrote:Allow me to rephrase my queries.
As a publicly quoted bank shareholder watching my "wealth" slither away because Mpigs won't play "ball", what should I demand of directors and management in their handling of the Mpigs?
What should Kenya Bankers Association's next move be?
The stumbling block between "wealth" creation and banking shareholders is Mpigs. What is the panacea? banks are profitable,the price will recover "Don't let the fear of losing be greater than the excitement of winning."
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