Executive Summary

The Central Bank of Kenya (Amendment) Act, 2026 (Amendment Act) introduces significant reforms to the mandate, powers and operational framework of the Central Bank of Kenya (CBK). Published in the Kenya Gazette on 10 July 2026, the Amendment Law took effect on 24 July 2026.

The amendments strengthen the CBK's prudential oversight role, establish a formal Emergency Liquidity Assistance (ELA) regime and give the CBK power to deal in precious metals in addition to gold. Collectively, these changes signal a shift toward a more robust regulatory architecture aimed at enhancing financial stability, strengthening crisis management mechanisms and aligning the Kenyan financial sector with international standards.

Key amendments

Revised Emergency Liquidity Assistance framework

The amendment to section 36 represents the most far-reaching reform under the Amendment Act. The previous framework allowed the CBK to provide loans to specified banks and microfinance banks for up to six months, as long as these loans were secured by Treasury bills or other government securities. The framework contained limited eligibility requirements and largely relied on providing acceptable collateral. The Amendment Act repeals this framework and introduces a more sophisticated dual-track structure for liquidity support.

The first track relates to routine monetary policy lending. Under this framework, the CBK may provide loans and advances as necessary to implement monetary policy objectives and maintain orderly market conditions. Notably, the previous six-month lending limit has been removed, providing the CBK with greater flexibility in managing market liquidity.

The second track establishes a formal ELA regime. Access to ELA is restricted to circumstances in which the CBK determines that support is necessary to preserve financial stability. Institutions seeking assistance must satisfy the CBK's solvency and viability criteria, not be in the process of liquidating and, in the CBK's opinion, be systemically capable of causing broader systemic disruption in the event of failure.

The Amendment Act characterizes ELA as a discretionary and temporary support mechanism. Although, in the first track, ELA support would be granted for up to 12 months, extensions may be given when necessary. Institutions that receive loans and advances from the CBK must also pledge collateral that meets valuation and risk-management standards prescribed by the CBK. The new framework fundamentally changes emergency support from automatic and collateral-based to a stability-preservation tool.

Twin-track mandate

One of the most notable reforms is the amendment of section 4(2) of the Principal Act, which redefines the statutory objectives of the CBK. Previously, the Principal Act articulated the single overarching objective of fostering a stable and market-based financial system. The Amendment Act replaces this broad formulation with a dual mandate.

Under the revised provision, the first objective is to foster "the stability, resilience, liquidity, solvency, integrity and proper functioning of a market-based financial system." The second objective is to foster "the soundness, safety, and effective regulation of the banking system." This distinction is significant because it elevates prudential regulation from an implied responsibility to an express statutory objective.

With its supervisory and regulatory functions expressly anchored in legislation, the CBK now has a clearer legal basis for intervening in matters affecting the safety and soundness of regulated institutions. Regulatory actions that may previously have relied on broad interpretations of CBK's mandate now have explicit statutory support.

Deputy Governor appointments

The Amendment Act introduces a governance-related reform concerning the appointment of Deputy Governors of the CBK.

Previously, section 13B(1) required Deputy Governors to be appointed by the President with the approval of Parliament. The Amendment Act replaces the reference to "Parliament" with "the National Assembly." This change aligns the appointment process for Deputy Governors with that of the Governor under section 13(1), which already requires National Assembly approval. Although largely procedural, the amendment eliminates ambiguity regarding which legislative body exercises approval authority.

Capacity-building mandate

Section 4A introduces a formal capacity-building mandate for the CBK. For the first time, the Amendment Act expressly empowers the CBK to provide training and capacity-building programs not only to its own staff but also to members of the public, government institutions and individuals from other jurisdictions.

To support this expanded role, section 57(3) has been amended to extend the CBK's regulation-making powers to matters relating to capacity building and training. This makes sure that the CBK possesses the necessary authority to issue regulations, guidelines and operational frameworks to govern the delivery of these programs.

Dealings in precious metals

The Amendment Act gives the CBK new powers to deal in precious metals under terms and conditions that the CBK determines. Additionally, precious metals may now form part of the reserve of external assets that the CBK is required to maintain. The amendments effectively authorize the CBK to procure precious metals locally or internationally, use such metals to maintain external reserves and dispose of them at will.

Equally significant is the removal of the statutory requirement linking transaction rates in dealings in precious metals to international agreement benchmarks. The result is increased operational flexibility for the CBK, given its unrestricted discretion in setting rates for transactions involving precious metals.

Renaming of the Deposit Protection Fund Board

The Amendment Act also updates section 46A to reflect institutional changes within Kenya's deposit insurance framework. The proviso, which authorizes the CBK to lend to the deposit insurer for up to three years against government securities, remains substantively unchanged. The only amendment involves replacing references to the former "Deposit Protection Fund Board" with the "Kenya Deposit Insurance Corporation" (KDIC), reflecting the legal restructuring of the institution under the Kenya Deposit Insurance Act.

Implications

The Amendment Act has significant implications for banks, microfinance institutions, financial service providers and investors.

The enhanced statutory mandate strengthens the Central Bank's supervisory authority and provides a clearer legal foundation for regulatory interventions. Institutions may face increased regulatory scrutiny focused on financial resilience, governance standards, consumer protection and systemic stability.

In addition, the new ELA framework raises the threshold for accessing CBK support during periods of financial distress. Institutions can no longer assume that the availability of collateral alone will qualify them for emergency funding. Instead, they must demonstrate solvency, viability and systemic relevance. This may require institutions to strengthen capital adequacy, risk management and contingency planning arrangements.

Overall, the Amendment Act represents a significant modernization of Kenya's central banking framework, reinforcing financial stability objectives while equipping the CBK with broader tools to regulate the financial sector, manage crises and respond to evolving market conditions.