The Central Bank of Kenya (Mortgage Refinance Companies) Regulations, 2019
The Regulations are cited as the Central Bank of Kenya (Mortgage Refinance Companies) Regulations.
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- Jurisdiction
- Kenya
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- Notice
- Citation
- Legal Notice 134 of 2019
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- Undated source snapshot
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- en
Source attribution: Source: Kenya Law
Statute overview
About this statute
The Regulations are cited as the Central Bank of Kenya (Mortgage Refinance Companies) Regulations. Interpretation includes the phrase "its holding company or its subsidiary". Lists authorised activities relating to mortgage refinance operations and states penalties for contravention. Lists the documents, forms and company qualifications required when applying for a licence, including incorporation documents, fit-and-proper forms, policies, agreements and recent financial statements. The Bank may grant licences if the applicant meets regulatory requirements within ninety days; the Bank may impose and vary licence conditions; and persons granted licences must pay an annual fee as set out in the Fourth Schedule at times determined by the Bank.
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Provisions of The Central Bank of Kenya (Mortgage Refinance Companies) Regulations, 2019
Showing 58 of 58
Part I
PRELIMINARY
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PRELIMINARY - 1. Citation
AI-assisted research summary: The Regulations are cited as the Central Bank of Kenya (Mortgage Refinance Companies) Regulations.
Section 1. Citation Section These Regulations may be cited as the Central Bank of Kenya (Mortgage Refinance Companies) Regulations. - 2
PRELIMINARY - 2. Interpretation
AI-assisted research summary: Interpretation includes the phrase "its holding company or its subsidiary".
Section 2. Interpretation Section its holding company or its subsidiary;
Part II
MORTGAGE REFINANCE BUSINESS
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MORTGAGE REFINANCE BUSINESS - 3. Authorized activities
AI-assisted research summary: Lists authorised activities relating to mortgage refinance operations and states penalties for contravention.
Section 3. Authorized activities Section 3(1)(a) refinancing or purchasing of eligible mortgage loans; Section 3(1)(b) investment in debt securities issued by the Government of Kenya or any guaranteed debt; Section 3(1)(c) providing fully secured long term financing to primary mortgage lenders for financing of eligible mortgages; Section 3(1)(d) issuing bonds, notes and other financial instruments for purposes of meeting its objectives; and Section 3(1)(e) other activities as may be determined by the Bank from time to time. Section 3(2) Any person who contravenes the provisions of this regulation commits an offence and is liable, on conviction to a fine not exceeding five hundred thousand shillings, or to imprisonment for a term not exceeding three years, or to both.
Part III
LICENSING
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LICENSING - 4. Application for a licence
AI-assisted research summary: Lists the documents, forms and company qualifications required when applying for a licence, including incorporation documents, fit-and-proper forms, policies, agreements and recent financial statements.
Section 4. Application for a licence Section 4(1)(a) is a company incorporated under the Companies Act (Cap. 486); Section 4(1)(b) meets the capital adequacy requirements set out in the First Schedule; and Section 4(1)(c) ensure that its significant shareholders, directors and senior officers meet the fit and proper criteria set out in the Second Schedule. Section 4(2)(a) a duly completed "fit and proper" form for proposed significant shareholders, directors, chief executive officer and other senior officers in form CBK MRC 1-2 set out in the Third Schedule; Section 4(2)(b) names and addresses of the shareholders of the company in form CBK MRC 1-3 set out in the Third Schedule; Section 4(2)(c) proof of payment of the application fee set out in the Fourth Schedule; Section 4(2)(d) a certified copy of the certificate of incorporation of the mortgage refinance company from the Registrar of Companies; and Section 4(2)(e) a certified copy of the Memorandum and Articles of Association of the mortgage refinance company. Section 4(3)(a) a certified copy of the Memorandum and Articles of Association of any corporate body that proposes to have a significant shareholding in the mortgage refinance company; Section 4(3)(b) a certified copy of the constitutive documents of an unincorporated person that proposes to have a significant shareholding in the mortgage refinance company; Section 4(3)(c) a description of the accounting system and the information and communication technology to be used in the operations of the mortgage refinance company; Section 4(3)(d) the organization chart, number of employees, positions and job descriptions of senior officers; Section 4(3)(e) description of internal control procedures that the mortgage refinance company shall implement; Section 4(3)(f) description of shareholders, board and senior officers and strategy for the successful operation of the applicant; Section 4(3)(g) description of any intended products and services which the proposed mortgage refinance company intends to provide and how such products and services shall benefit the country; Section 4(3)(h) the master servicing and refinancing agreement governing the lending operations between the mortgage refinance company and the participating primary mortgage lenders; Section 4(3)(i) the shareholders or investment agreement (where applicable) governing the relationships between shareholders and ensuring that ownership is accessible for primary mortgage lenders meeting the requirements and standards specified by the Bank, in the agreement or in the mortgage refinance company's Memorandum and Articles of Association; Section 4(3)(j) the investment policy, credit policy, asset liability management, liquidity management, financial management, code of ethics and business conduct; Section 4(3)(k) a sworn declaration signed by every officer as specified in the application form; Section 4(3)(l) a business plan of the intended business with financial projections of at least three years; and Section 4(3)(m) the financial statements for the last three years, where applicable. - 5
LICENSING - 5. Issuance of a licence
AI-assisted research summary: The Bank may grant licences if the applicant meets regulatory requirements within ninety days; the Bank may impose and vary licence conditions; and persons granted licences must pay an annual fee as set out in the Fourth Schedule at times determined by the Bank.
Section 5. Issuance of a licence Section 5(1) The Bank may, if satisfied that the applicant meets the requirements under these Regulations, grant a licence to the applicant, within ninety days of the application. Section 5(2)(a) the financial condition and history of the applicant; Section 5(2)(b) adequacy of the business strategy of the applicant; Section 5(2)(c) the professional and moral suitability of the persons proposed to manage or control the proposed mortgage refinance company; Section 5(2)(d) the adequacy of its capital structure and earning prospects; and Section 5(2)(e) the public interest which shall be served by the granting of the licence. Section 5(3) The Bank may endorse on a licence granted under sub regulation (1), such conditions as it considers necessary and may, from time to time, vary or substitute such conditions. Section 5(4) A person granted a licence shall pay an annual fee to the Bank as set out in the Fourth Schedule at such time as the Bank may determine. Section 5(5) A licence shall remain valid unless suspended or revoked by the Bank in accordance with these Regulations. Section 5(6) The Bank shall cause the name of a mortgage refinance company to be published in the Gazette within seven days of grant of licence. - 6
LICENSING - 6. Licence not transferable
AI-assisted research summary: A licence granted under these Regulations shall not be transferred, assigned or encumbered in any way.
Section 6. Licence not transferable Section A licence granted under these Regulations shall not be transferred, assigned or encumbered in any way. - 7
LICENSING - 7. Suspension or revocation of licence
AI-assisted research summary: The Bank may suspend or revoke licences for specified reasons; it must publish revoked licence holders in the Gazette within seven days, may extend suspensions by up to three months, must at expiry either lift or revoke the licence, can require transfer of customer records, can permit limited business operations to close down, and must give affected licensees an opportunity to be heard.
Section 7. Suspension or revocation of licence Section 7(1)(a) ceases to carry on mortgage refinance business; Section 7(1)(b) goes into liquidation or an order is issued for winding up; Section 7(1)(c) contravenes any of the conditions in the licence; Section 7(1)(d) has contravened any of the provisions of the Act or any other relevant written law; or Section 7(1)(e) conducts its business in a manner detrimental to its customers, creditors or members of the public. Section 7(2) A suspension of a licence under this regulation shall not exceed a period of three months: Provided that the Bank may, if it considers necessary extend the suspension for a period not exceeding three months. Section 7(3) The Bank shall at the expiry of the suspension period specified under sub-regulation (2) either lift the suspension or revoke the licence as the Bank considers appropriate. Section 7(4) The Bank shall cause the names of mortgage refinance companies whose licences have been revoked to be published in the Gazette within seven days of the revocation. Section 7(5)(a) require the licensee to transfer to its customer, records relating to customer property or the affairs of the customer held at any time for the customer, in such manner, as the Bank may specify in the notice; or Section 7(5)(b) permit the licensee, subject to such conditions as the Bank may specify in the notice, to carry on business operations for the purpose of closing down the business connected with the revocation. Section 7(6) The Bank shall, in all cases where the Bank takes action under this regulation give the licensee affected by such action an opportunity to be heard. - 8
LICENSING - 8. Amalgamations and transfer of assets and liabilities
AI-assisted research summary: A mortgage refinance company must not amalgamate with or transfer its assets or liabilities to another entity without the Bank's prior written approval.
Section 8. Amalgamations and transfer of assets and liabilities Section A mortgage refinance company shall not enter into an amalgamation or an arrangement to transfer all or any part of its assets and liabilities to another entity except with the prior written approval of the Bank.
Part IV
GOVERNANCE
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GOVERNANCE - 10. Board and committees
AI-assisted research summary: Mortgage refinance companies must be managed by a board; boards must have at least two‑thirds non-executive members and must establish specified committees (audit, credit, assets and liabilities) and any others necessary for proper business performance.
Section 10. Board and committees Section 10(1) Every mortgage refinance company shall be managed by a board which shall have at least two thirds of its members being non-executive members. Section 10(2) Every board shall constitute at least an audit committee, a credit committee, an assets and liabilities committee and such other committees as shall be necessary for the proper performance of its business. - 11
GOVERNANCE - 11. Membership of committees
AI-assisted research summary: Committees must have at least three members including two non-executive directors with specified qualifications; the CEO may not sit on the audit committee; the chairperson may not sit on credit and audit committees but may attend by invitation for consultation only; a person may not be a director of more than one mortgage refinance company except for specified corporate group relationships.
Section 11. Membership of committees Section 11(1) Every committee of the board shall consist of at least three members, two of whom shall be non-executive directors of the mortgage refinance company and who are qualified in finance, audit, information technology, banking, economics or law. Section 11(2) The chief executive officer of a mortgage refinance company shall not be a member of the audit committee, while the chairperson of the board shall not be a member of the credit and audit committees, but may attend by invitation for consultation only. Section 11(3) No person shall hold the position of a director in more than one mortgage refinance company, unless the mortgage refinance company are subsidiaries or holding companies of the mortgage refinance company. - 12
GOVERNANCE - 12. Responsibilities of the board
AI-assisted research summary: The board must oversee and take overall responsibility for the mortgage refinance company, including approving strategy, setting governance and risk strategy, overseeing senior management, defining board and committee functions, managing conflicts of interest, appointing competent management, reviewing controls and communicating corporate values; board members must remain qualified and trained.
Section 12. Responsibilities of the board Section 12(1) A board shall have the overall responsibility of the mortgage refinance company, including approving and overseeing the implementation of the mortgage refinance company's strategic objectives, risk strategy, corporate governance and corporate values. Section 12(2)(a) providing oversight of senior management; Section 12(2)(b) the demarcation of the functions, responsibilities and powers of the board, various board committees and matters reserved for final decision-making or pre-approval by the board; Section 12(2)(b)(i) the demarcation of the functions, responsibilities and powers of the board, various board committees and matters reserved for final decision-making or pre-approval by the board; Section 12(2)(b)(ii) the policies and practices of the board in respect of conflicts of interest and convening of board meetings; Section 12(2)(b)(iii) declaration of interests that may give rise to a potential or perceived conflict or interfere with exercise of objective judgment; Section 12(2)(b)(iv) the policy on directorships in other entities by board members; Section 12(2)(c) constitute an organizational structure that facilitates effective decision making and good governance; Section 12(2)(d) define the duties of management and appoint competent, qualified and experienced persons to administer the mortgage refinance company; Section 12(2)(e) regularly review policies, processes and controls with senior management or internal control functions (including internal audit, risk management and compliance) to determine areas needing improvement and address significant risks and issues; Section 12(2)(f) communicating the corporate values, professional standards or codes of conduct. Section 12(3) Board members shall be and remain qualified, including through training and Continuous Professional Development, for their positions and shall have a clear understanding of their role in corporate governance and be able to exercise sound and objective judgment about the affairs of the mortgage refinance company. - 13
GOVERNANCE - 13. Audit committee
AI-assisted research summary: Section 13 sets out the audit committee's functions; gives internal and external auditors free access to the audit committee; allows the external auditor to attend and be heard at audit committee meetings upon request; and requires the audit committee chairperson to convene a meeting at the external auditors' request.
Section 13. Audit committee Section 13(1)(a) ensuring that financial and operational information is prepared in a timely and accurate manner; Section 13(1)(b) improving the quality of financial record keeping and reporting; Section 13(1)(c) strengthening the effectiveness of internal and external audit functions; Section 13(1)(d) strengthening the internal control environment and risk management; Section 13(1)(e) enhancing public confidence in the credibility and stability of the mortgage refinance company; Section 13(1)(f) monitoring incidences of non-compliance with the Act or any other relevant legislations and advising the board on the best solutions; and Section 13(1)(g) monitoring the ethical conduct of the mortgage refinance company and developing the code of conduct and ethical standards and requirements, including effectiveness of procedures for handling and reporting complaints. Section 13(2) The external and internal auditors of a mortgage refinance company shall have free access to the audit committee. Section 13(3) The external auditor may, upon request, attend and be heard at any meeting of the audit committee. Section 13(4) Upon the request of the external auditors, the chairperson of the audit committee shall convene a meeting to consider any matter that the external auditor deems necessary to be brought to the attention of directors or shareholders. - 14
GOVERNANCE - 14. Credit committee
AI-assisted research summary: The Credit committee must review and oversee the overall lending policy, including monitoring and risk management tools.
Section 14. Credit committee Section review and oversee the overall lending policy, including monitoring and risk management tools; - 15
GOVERNANCE - 15. Assets committee
AI-assisted research summary: Every mortgage refinance company must establish an assets committee.
Section 15. Assets committee Section 15(1) Every mortgage refinance company shall establish a management committee to be known as the assets committee. Section 15(2) The assets and liabilities committee shall drive the strategy for the mortgage refinance company regarding the mix of assets and liabilities and its expectations of the future and the potential consequences of interest rate movements, liquidity constraints, and capital adequacy. Section 15(3)(a) reviewing and assessing the integrity of the internal and risk control systems; Section 15(3)(b) ensuring that the risk policies and strategies are effectively managed; Section 15(3)(c) setting out the nature, role, responsibility and authority of the risk management function of the mortgage refinance company; Section 15(3)(d) providing an independent and objective oversight and review of the information raised by management at different levels; Section 15(3)(e) monitoring the limits on loans to capital ratios; Section 15(3)(f) monitoring the limits on maximum and minimum maturities for all categories of assets and liabilities as set by the board; Section 15(3)(g) monitoring limits on the sensitivity of the net interest margin on changes in market interest rates as set by the board; Section 15(3)(h) monitoring the maximum percentage imbalance between rates and sensitive assets and liabilities as set by the board; Section 15(3)(i) monitoring the limits on minimum spread acceptable between costs and yields of liabilities and assets as set by the board; Section 15(3)(j) monitoring the limits on minimum liquidity provision to be maintained to sustain operations while longer term adjustments are set by the board; Section 15(3)(k) monitoring the sources of funding; Section 15(3)(l) monitoring the company's policies, procedures and holding portfolio to ensure that it achieves its goals; and Section 15(3)(m) generally, to implement the funds management policy of the mortgage refinance company. Section 15(4) To perform its duties effectively, the assets and liabilities committee may access or obtain such professional advice as it may consider necessary to perform its functions. Section 15(5) The assets and liabilities committee shall have access to any information and records it needs to fulfil its duties and responsibilities. - 16
GOVERNANCE - 16. Conduct of business
AI-assisted research summary: A board must conduct its business and affairs in the manner set out in the Fifth Schedule.
Section 16. Conduct of business Section The conduct of the business and affairs of a board shall be as set out in the Fifth Schedule. - 17
GOVERNANCE - 17. Monitoring and evaluation
AI-assisted research summary: Mortgage refinance companies must complete a prescribed self-assessment questionnaire and carry out an annual self-assessment evaluation within three months after the end of each financial year.
Section 17. Monitoring and evaluation Section 17(1)(a) a self-assessment questionnaire in the manner as may be prescribed; and Section 17(1)(b) an annual self-assessment evaluation, not later than three months after the end of each financial year. Section 17(2) A mortgage refinance company that contravenes sub-regulation (1) shall be liable to any of the sanctions provided for under in regulation 57. - 18
GOVERNANCE - 18. Fit and proper obligations
AI-assisted research summary: Persons may not be a director, senior officer or significant shareholder of a mortgage refinance company unless certified fit and proper by the Bank; the Bank may assess suitability and direct non‑complying significant shareholders to cease voting, reduce holdings below 10% within twelve months (or another period), or dispose of shares.
Section 18. Fit and proper obligations Section 18(1) A person shall not be a director, a senior officer or a significant shareholder of a mortgage refinance company unless the Bank has certified the person as fit and proper in accordance with the criteria set out in the Second Schedule. Section 18(2) The Bank may, where it deems it necessary, carry out an assessment of the professional and moral suitability of the persons managing or controlling a mortgage refinance company. Section 18(3)(a) cease to exercise all voting rights immediately upon the mortgage refinance company being notified by the Bank in writing that the shareholder does not fulfil the fit and proper criteria; and Section 18(3)(b) reduce the holding of shares to below ten per centum of the share capital in the mortgage refinance company within twelve months, or such other period as the Bank may determine. Section 18(4) The Bank may direct a significant shareholder who has been found not to be fulfilling the fit and proper criteria to dispose of all of his shares in a mortgage refinance company within such period as the Bank may direct. Section 18(5) The Bank may disqualify any director or senior officer from holding any office in a mortgage refinance company if he does not meet the fit and proper criteria or for any other good cause shown. - 19
GOVERNANCE - 19. Chief executive officer
AI-assisted research summary: Every mortgage refinance company must have a chief executive officer; the board appoints the CEO with the Bank's approval; the CEO must be a board member; the Board must report to the Bank within seven days if the CEO resigns or is removed.
Section 19. Chief executive officer Section 19(1) Every mortgage refinance company shall have a chief executive officer who shall be appointed by the board, with the approval of the Bank, on such terms and conditions of service as shall be provided in the instrument of appointment. Section 19(2) A chief executive officer shall be a member of the board. Section 19(3) A person shall not be appointed as a chief executive officer of a mortgage refinance company unless that person has at least five years' experience in banking business, economics, law or finance at senior management level with experience in microfinance practices or such other conditions as may be determined by the board. Section 19(4) Where the chief executive officer resigns or is removed from office, the Board shall report to the Bank within seven days of such resignation or removal. - 20
GOVERNANCE - 20. Responsibilities of the chief executive officer
AI-assisted research summary: The chief executive officer is responsible for implementing the policies developed by the board.
Section 20. Responsibilities of the chief executive officer Section implement the policies developed by the board; - 21
GOVERNANCE - 21. Shareholding limit
AI-assisted research summary: Shareholders of a mortgage refinance company must not hold more than 25% of the company's shares, except for public entities or multilateral development banks.
Section 21. Shareholding limit Section 21(1) A shareholder of a mortgage refinance company shall not, whether directly or indirectly, hold more than twenty-five per centum of the shares of the mortgage refinance company unless it is a public entity or a multilateral development bank. Section 21(2) The Bank may exempt any other person from the provisions of this regulation on such condition and requirements as may be specified by the Bank. - 22
GOVERNANCE - 22. Shareholder rules
AI-assisted research summary: A mortgage refinance company must act equitably and fairly and consider the interests of all its shareholders when financing or refinancing a mortgage.
Section 22. Shareholder rules Section 22(1)(a) terms and conditions under which eligible mortgages may be refinanced; Section 22(1)(b) eligibility of mortgages for refinancing; Section 22(1)(c) fair and equitable access by all shareholders to services of a mortgage refinance company; and Section 22(1)(d) the exceptional circumstances under which a certain category of primary mortgage lenders may access fully secured long term financing from a mortgage refinance company. Section 22(2) In financing or refinancing a mortgage, a mortgage refinance company shall act equitably, fairly and consider the interests of all its shareholders. - 23
GOVERNANCE - 23. Records
AI-assisted research summary: Mortgage refinance companies must keep accurate accounting records and reports and retain them for seven years; officers, employees or agents must not make or permit false or misleading entries.
Section 23. Records Section 23(1) A mortgage refinance company shall maintain accurate and complete accounting records and reports. Section 23(2) The records and reports of a mortgage refinance company shall be retained for a period of seven years. Section 23(3) An officer, employee or agent of a mortgage refinance company shall not make entries, or allow entries to be made, on any account, record or document of the mortgage refinance company that are false or mislead the true authorization limits or approval authority of such transactions. Section 23(4) All records and computer files or programmes of the mortgage refinance company, including personnel files, financial statements and customer information shall be accessed and used only for the purposes for which they were originally intended. - 24
GOVERNANCE - 24. Confidentiality
AI-assisted research summary: Protect the confidentiality of customer information and transactions.
Section 24. Confidentiality Section protect the confidentiality of customer information and transactions; - 25
GOVERNANCE - 25. Reckless and fraudulent activities
AI-assisted research summary: Section 25 lists specific prohibited or restricted activities in subsections (1)(a)-(d) and (2)(a)-(d).
Section 25. Reckless and fraudulent activities Section 25(1)(a) allow a credit facility or guarantee to be outstanding; Section 25(1)(b) incur any liability; Section 25(1)(c) enter into any contract or transaction; or Section 25(1)(d) conduct its business or part thereof, Section 25(2)(a) transacting the business beyond the limits set under the Act; Section 25(2)(b) offering facilities contrary to any guidelines or regulations issued by the Central Bank; Section 25(2)(c) failing to observe the mortgage refinance company's policies as approved by the board of directors; or Section 25(2)(d) misuse of position or facilities of the mortgage refinance company for personal gain; - 26
GOVERNANCE - 26. Places of business
AI-assisted research summary: Branches of a mortgage refinance company may not open, relocate or close without the Bank's prior written approval; guidelines must set a notification framework for places of business that do not require approval.
Section 26. Places of business Section 26(1) No branch of a mortgage refinance company shall be opened, relocated or closed without the prior written approval of the Bank. Section 26(2) Revoked by[LN 81 of 2020, r. 2.] Section 26(3) The guidelines shall provide a framework for notification to the Bank of places of business whose opening, relocation or closure does not require the approval of the Bank. [ LN 30 of 2020 , r. 2.] - 27
GOVERNANCE - 27. Use of agents
AI-assisted research summary: The Bank may provide a framework for agents; mortgage refinance companies are liable for their agents' acts or omissions related to agency business.
Section 27. Use of agents Section 27(1) The Bank may provide a framework for the appointment and operation of agents by mortgage refinance companies. Section 27(2) A mortgage refinance company shall be liable for the acts or omissions of its agents if the acts or omissions relate to the agency business. - 9
GOVERNANCE - 9. Corporate governance
AI-assisted research summary: A licensee must comply with the corporate governance requirements issued by the Bank.
Section 9. Corporate governance Section A licensee shall comply with the corporate governance requirements issued by the Bank: Provided that where the licensee issues securities to the public, the applicable corporate governance requirements for issuers of securities to the public shall also apply.
Part IX
INTERNAL CONTROLS
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INTERNAL CONTROLS - 44. Internal controls
AI-assisted research summary: Mortgage refinance companies must implement and maintain effective internal controls, review them at least annually, and are liable to sanctions for contraventions.
Section 44. Internal controls Section 44(1) Every mortgage refinance company shall implement an effective internal control system that is consistent with the nature, complexity and risk inherent in their on- and off-balance sheet activities and that is designed to respond to changes in the company's environment and circumstances. Section 44(2)(a) a comprehensive financial, operational and compliance data and information, as well as external market information about the mortgage refinance company's operations and activities, events and market conditions that are relevant for decision making and the information shall be accurate, reliable, timely, and accessible and maintained in a consistent format; Section 44(2)(b) reliable information systems to cover all significant activities and operations of the mortgage refinance company including the use of data in an electronic form; and Section 44(2)(c) effective channels of communication to ensure that staff fully understand and adhere to policies and procedures affecting their duties and responsibilities and that other relevant information is communicated to the appropriate personnel. Section 44(3) Every mortgage refinance company shall review, at least once every year, its internal controls with a view to appropriately addressing any new or previously uncontrolled risks and changing market conditions. Section 44(4) A mortgage refinance company that contravenes this regulation is liable to any of the sanctions provided for under regulation 57. - 45
INTERNAL CONTROLS - 45. Internal audit
AI-assisted research summary: Requires mortgage refinance companies to review their audit charter at least once a year; requires the audit committee to approve the charter and the board to ratify it before each financial year; contraventions attract sanctions under regulation 57.
Section 45. Internal audit Section 45(1)(a) appoint an internal auditor; and Section 45(1)(b) develop a written internal audit charter that specifies and enhances the standing of the internal audit purpose, authority and responsibility within the mortgage refinance company. Section 45(2)(a) the objectives and scope of the internal audit function; Section 45(2)(b) internal audit's role and responsibility for governance, risk management, consulting services, and fraud investigations, among others; and Section 45(2)(c) internal auditor's position within the mortgage refinance company, its powers, responsibilities and relations with other control functions. Section 45(3) Every mortgage refinance company shall review its audit charter at least once every year. Section 45(4) The audit charter shall be approved by the audit committee and subsequently ratified by the board as part of their supervisory role before the start of each financial year. Section 45(5) A mortgage refinance company that contravenes this regulation commits is liable to any of the sanctions provided for under regulation 57. - 46
INTERNAL CONTROLS - 46. Audit plan
AI-assisted research summary: Internal auditors must prepare an annual audit work plan and present it to the audit committee; internal auditors must include findings and recommendations in reports; reports and working papers must be retained for at least five years; the audit committee must follow up recommendations, communicate status at least quarterly, and maintain coordination with functional officers.
Section 46. Audit plan Section 46(1) Every internal auditor shall prepare an annual audit work plan for the assignments to be performed during the next financial year and present it to the audit committee for review. Section 46(2)(a) the scope; Section 46(2)(b) objective; Section 46(2)(c) timing; Section 46(2)(d) frequency; and Section 46(2)(e) resources of the planned internal audit work. Section 46(3) The report of the internal auditor shall contain the findings and recommendations as well as the responses of the officers. Section 46(4) The reports and working papers of the internal auditors shall be kept for at least five years. Section 46(5) The audit committee shall follow up its recommendations to verify whether the recommendations provided are implemented and the status of the recommendations shall be communicated to the audit committee at least on a quarterly basis and permanent coordination shall be maintained with all functional officers.
Part V
LOANS
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LOANS - 28. Credit extensions
AI-assisted research summary: Mortgage refinance companies may extend loans to eligible primary mortgage lenders and must set single-borrower limits; the Bank must approve refinancing eligibility criteria.
Section 28. Credit extensions Section 28(1) A mortgage refinance company may extend loans to primary mortgage lenders who are in good standing. Section 28(2)(a) meets its payment obligations; Section 28(2)(b) has not received a qualified opinion on its most recent audited financial statements; Section 28(2)(c) meets the capital adequacy requirements; Section 28(2)(d) complies with regulatory requirements; and Section 28(2)(e) meets any other conditions set by the Bank and a mortgage refinance company. Section 28(3) A mortgage refinance company shall set single borrower limits in its credit policy and the limits shall comply with any requirement provided for by the Bank. Section 28(4)(a) charges and fees, if any; Section 28(4)(b) interest rate to be charged and whether on a reducing balance or not; and Section 28(4)(c) total cost of credit which shall include the principal amount, interest, fees and charges. Section 28(5) The Bank shall approve the criteria for mortgages eligible for refinancing under these Regulations. Section 28(6) A refinanced mortgage to a director, chief executive officer or senior officer of a primary mortgage lender shall be on terms similar to those offered to ordinary customers of the primary mortgage lender. - 29
LOANS - 29. Qualified collateral
AI-assisted research summary: Mortgage refinance company loans must be fully secured by qualified collateral.
Section 29. Qualified collateral Section 29(1) A mortgage refinance company loan shall be fully secured by qualified collateral. Section 29(2)(a) in the case of eligible mortgage, the qualified collateral covers at least one hundred and twenty per centum of that loan amount; Section 29(2)(b) it is secured by cash or government securities of equal amount; and Section 29(2)(c) any other qualified collateral as may be approved by the Bank. Section 29(3)(a) assignment of receivables; Section 29(3)(b) lien or assignment of a portfolio of first ranking charges or mortgages over owner-occupied properties which are fully insured and not in arrears; Section 29(3)(c) securities issued, insured or guaranteed by the Government of Kenya; Section 29(3)(d) cash deposits; or Section 29(3)(e) any other qualified collateral as may be determined by the Bank from time to time. Section 29(4)(a) assess the book value of the qualified collateral securing the outstanding loans at least every six months; Section 29(4)(b) require primary mortgage lenders to provide additional qualified collateral to compensate for any diminution in the market value or book value of the pledged collateral securing their outstanding loans; Section 29(4)(c) require primary mortgage lenders to substitute qualified collateral if any security or residential mortgage securing an outstanding loan matures, redeemed, defaults, or becomes more than ninety days delinquent; Section 29(4)(d) require the primary mortgage lenders to provide such additional information as it may reasonably require; and Section 29(4)(e) carry out such site inspection as may be necessary or reasonable to verify the information provided by the primary mortgage lender. Section 29(5) The outstanding loans to a mortgage refinance company shall become due and payable if the primary mortgage lender is unable to provide sufficient qualified collateral to support its outstanding loans.
Part VI
RISK CLASSIFICATION AND PROVISIONING OF LOANS
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RISK CLASSIFICATION AND PROVISIONING OF LOANS - 30. Loan review function of a mortgage refinance company
AI-assisted research summary: Requires certain loan-review arrangements for mortgage refinance companies: the loan portfolio and lending function must conform to an approved written lending policy; management and the board must be adequately informed about credit and risk management; the board must approve and adopt the policy; failure to comply with sub-regulation (1) exposes the company to sanctions in regulation 57.
Section 30. Loan review function of a mortgage refinance company Section 30(1)(a) the loan portfolio and lending function conforms to a sound written lending policy, which has been approved and adopted by the board; Section 30(1)(b) management and the board are adequately informed regarding credit risk, among other risks and risk management control effectiveness; Section 30(1)(c) problem accounts are identified properly and on a timely basis and internally classified in accordance with the classification criteria in these Regulations; and Section 30(1)(d) appropriate and adequate level of provisions for potential loss are made and maintained at all times. Section 30(2) A mortgage refinance company that contravenes sub-regulation (1) shall be liable to any of the sanctions provided for under in regulation 57. - 31
RISK CLASSIFICATION AND PROVISIONING OF LOANS - 31. Review of assets and reporting
AI-assisted research summary: Mortgage refinance companies must review assets at least once a year, make provisions when losses or reductions in recoverable amount occur, submit the review report to the Bank within fifteen days, submit returns as provided by the Bank, and may face administrative sanctions or sanctions under regulation 57 for contraventions.
Section 31. Review of assets and reporting Section 31(1) Every mortgage refinance company shall, at least once every year, review its assets and make necessary provisions as the need arises, if an actual loss of an asset occurs or when the recoverable amount of the asset is less than its carrying value. Section 31(2) Every mortgage refinance company shall submit a copy of the review report to the Bank within fifteen days from the date of the review. Section 31(3) Every mortgage refinance company shall submit returns in such manner as may be provided by the Bank. Section 31(4) A mortgage refinance company that fails to submit accurate information to the Bank on a timely basis is liable to such administrative sanction as may be provided by the Bank. Section 31(5) A mortgage refinance company that contravenes this regulation is liable to any of the sanctions provided for under in regulation 57. - 32
RISK CLASSIFICATION AND PROVISIONING OF LOANS - 32. Review and classification of loans
AI-assisted research summary: Mortgage refinance companies must review, classify and make provisions for their loan portfolios at least once every three months and follow Bank guidelines for classification; they must also reclassify related loans when one becomes non-performing and treat group loans as past due when a member defaults unless guaranteed.
Section 32. Review and classification of loans Section 32(1) Every mortgage refinance company shall review, classify and appropriately make provisions for its loan portfolio at least once every three months. Section 32(2) Every mortgage refinance company shall classify loans and advances in the manner provided for by guidelines issued by the Bank. Section 32(3) Where a mortgage refinance company has granted multiple loans to a single borrower, and any one of such loans is non-performing, the mortgage refinance company shall evaluate every other loan to that borrower and place such loans on non-performing status accordingly. Section 32(4) Every mortgage refinance company shall classify a group loan as past due in its entirety, when any of the members of the group defaults and the amount due is not covered by the members of the group: Provided that if the amount due is guaranteed by the members of the group, only the portion in arrears shall be accounted for as past due and the group members shall pay up for the guarantee. Section 32(5) A mortgage refinance company that contravenes this regulation is liable to any of the sanctions provided under regulation 57. - 33
RISK CLASSIFICATION AND PROVISIONING OF LOANS - 33. Loan provisioning
AI-assisted research summary: Loans classified "Normal" require 1%; "Watch" 5%; "Substandard" 25%; "Doubtful" 75%; and "Loss" 100%.
Section 33. Loan provisioning Section 33(1)(a) for loans classified "Normal", one per centum; Section 33(1)(b) for loans classified "Watch", five per centum; Section 33(1)(c) for loans classified -Substandard", twenty five per centum; Section 33(1)(d) for loans classified "Doubtful", seventy five per centum; and Section 33(1)(e) for loans classified "Loss", one hundred per centum. Section 33(2) Where the impairment charges computed under International Financial Reporting Standards are lower than provisions required under these Regulations, the excess provisions shall be treated as an appropriation of retained earnings. Section 33(3) Where the impairment charges computed under International Financial Reporting Standards are higher than provisions required under these Regulations, the International Financial Reporting Standards impairment charges shall be considered adequate for the purposes of these Regulations. Section 33(4) A mortgage refinance company that contravenes this regulation is liable to any of the sanctions provided for under in regulation 57. - 34
RISK CLASSIFICATION AND PROVISIONING OF LOANS - 34. Classification of renegotiated or restructured loans
AI-assisted research summary: Mortgage refinance companies may not restructure or renegotiate a loan or credit facility more than twice; loans restructured a second time receive specified classifications depending on repayment, and contravening persons are liable to sanctions under regulation 57.
Section 34. Classification of renegotiated or restructured loans Section 34(1)(a) all past due principal and interest is repaid in full at the time of renegotiation, in which case it may revert to 'Normal' classification; Section 34(1)(b) all past due interest is repaid in full at the time of renegotiation in which case it may revert to 'Watch' classification. Section 34(2)(a) all past due principal and interest is repaid in full at the time of renegotiation, in which case it may revert to 'Watch' classification or; Section 34(2)(b) all past due interest is repaid in full at the time of renegotiation in which case it may revert to 'substandard' classification; and Section 34(2)(c) all past due principal and interest is repaid in full at the time of renegotiation and there has been consistent repayment of three instalments in which case it may revert to 'Normal' classification. Section 34(3) A mortgage refinance company shall not restructure or renegotiate any loan or credit facility more than twice over the life of the original loan or credit facility. Section 34(4) Any loan or credit facility restructured for the second time shall be classified as "substandard" if all past due principal and interest is repaid in full at the time of renegotiation: Provided that if all past due interest is repaid in full at the time of renegotiation, the loan or credit facility shall be classified as doubtful. Section 34(5) A person who contravenes this regulation is liable to any of the sanctions provided for under regulation 57. - 35
RISK CLASSIFICATION AND PROVISIONING OF LOANS - 35. Limit on interest recoverable from non-performing loans
AI-assisted research summary: Mortgage refinance companies are limited in what they can recover from debtors on non-performing loans to the amounts listed in sub-regulation (2).
Section 35. Limit on interest recoverable from non-performing loans Section 35(1) A mortgage refinance company shall be limited in what it may recover from a debtor with respect to a non-performing loan to the maximum amount under sub-regulation (2). Section 35(2)(a) the principal owing when the loan becomes non-performing; Section 35(2)(b) interest, in accordance with the contract between the debtor and the mortgage refinance company, not exceeding the principal owing when the loan becomes non-performing; and Section 35(2)(c) expenses incurred in the recovery of any amounts owed by the debtor. Section 35(3) If a debtor resumes payments on a non-performing loan and then the loan becomes non-performing again, the limitation under sub-regulation (2) (a) and (b) shall be determined with respect to the time the loan last became non-performing. Section 35(4) This regulation shall not apply to limit any interest under a court order accruing after the order is made. Section 35(5) A mortgage refinance company shall not recover through a court of law any interest which is affected by the requirements of this regulation. Section 35(6) A loan becomes non-performing when principal or interest is due and unpaid for ninety days or more; or interest payments for ninety days or more have been re-financed, or rolled-over into a new loan. Section 35(7) In this regulation— "debtor" includes a person who becomes indebted to a mortgage refinance company because of a guarantee made with respect to the repayment of an amount owed by another person; and "loan" includes any advance, credit facility, financial guarantee or any other liability incurred on behalf of any person. - 36
RISK CLASSIFICATION AND PROVISIONING OF LOANS - 36. Write-off of loans
AI-assisted research summary: Every mortgage refinance company must write off loans (or portions classified as loss) within 180 days of classification if there are no recoveries during that period.
Section 36. Write-off of loans Section 36(1)(a) the mortgage refinance company loses control of the contractual rights over the loan; Section 36(1)(b) all or part of a loan is deemed uncollectible or there is no realistic prospect of recovery; Section 36(1)(c) the borrower becomes insolvent; or Section 36(1)(d) efforts to collect debt are abandoned for any other reason. Section 36(2) Every mortgage refinance company shall write off a loan or a portion of a loan classified as loss, within one hundred and eighty days of their being classified as loss, if there are no recoveries within that period. Section 36(3) A mortgage refinance company that contravenes this regulation is liable to such administrative sanction as may be prescribed by the Central Bank.
Part VII
CAPITAL REQUIREMENTS AND LIQUIDITY MANAGEMENT
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CAPITAL REQUIREMENTS AND LIQUIDITY MANAGEMENT - 37. Capital adequacy
AI-assisted research summary: Mortgage refinance companies must maintain capital requirements in the First Schedule; must maintain any leverage ratio specified by the Bank by notice in the Gazette; must not treat subordinated debt as supplementary capital without the Bank's prior written approval; must not raise capital from the capital markets without the Bank's prior written approval.
Section 37. Capital adequacy Section 37(1) A mortgage refinance company shall at all times maintain capital requirements set out in the First Schedule. Section 37(2) A mortgage refinance company shall maintain such leverage ratio as may be specified by the Bank by notice in the Gazette . Section 37(3) No mortgage refinance company shall treat any subordinated debt as supplementary capital except with the prior written approval of the Bank. Section 37(4) No mortgage refinance company shall raise any capital from the capital markets without the prior written approval of the Bank. - 38
CAPITAL REQUIREMENTS AND LIQUIDITY MANAGEMENT - 38. Liquidity management
AI-assisted research summary: Requires adoption of sound and prudent liquidity management and funding policies and maintenance of sufficient liquid assets; lists classes of assets that qualify as liquid assets (legal tender notes and coins in Kenya; balances held at the Bank; certain bank balances in Kenya and abroad; Kenya treasury bills and bonds with maturity not exceeding ninety-one days; and other assets the Bank may specify).
Section 38. Liquidity management Section 38(1)(a) adopt sound and prudent liquidity management and funding policies; and Section 38(1)(b) maintain sufficient liquid assets for meeting its maturing obligations and liabilities. Section 38(2)(a) notes and coins which are legal tender in Kenya; Section 38(2)(b) balances held at the Bank; Section 38(2)(c) balances at other banks in Kenya after deducting therefrom balances owed to those other banks; Section 38(2)(d) balances at banks abroad withdrawable on demand or short notice and money at call abroad after deducting therefrom balances owed to banks abroad where the balances and money at call and short notice are denominated in convertible currencies; Provided that for the purposes of this paragraph "bank abroad" means a bank outside Kenya or an office of any bank outside Kenya; Section 38(2)(e) Kenya treasury bills and bonds of a maturity not exceeding ninety-one days which are freely marketable and re-discountable at the Bank; and Section 38(2)(f) such other assets as the Bank may specify. - 39
CAPITAL REQUIREMENTS AND LIQUIDITY MANAGEMENT - 39. Liquidity risk management plan
AI-assisted research summary: Mortgage refinance companies must plan and fund liquidity requirements over specific time periods set by the company.
Section 39. Liquidity risk management plan Section 39(1) Every mortgage refinance company shall plan and fund its liquidity requirements over specific time periods as set by the mortgage refinance company. Section 39(2)(a) management structures and information systems; Section 39(2)(b) measuring and monitoring net funding requirements; Section 39(2)(c) contingency planning schemes; and Section 39(2)(d) internal controls for liquidity management. Section 39(3) A mortgage refinance company that fails to comply with this Regulation shall be liable to any of the sanctions provided for under regulation 57. - 40
CAPITAL REQUIREMENTS AND LIQUIDITY MANAGEMENT - 40. Risk Management
AI-assisted research summary: Mortgage refinance companies must identify, assess, manage, control and mitigate risks, and must comply with any risk management guidelines issued by the Bank.
Section 40. Risk Management Section 40(1)(a) strategic risk; Section 40(1)(b) credit risk; Section 40(1)(c) liquidity risk; Section 40(1)(d) market risk Section 40(1)(e) operational risk; Section 40(1)(f) information and communication technology risk; Section 40(1)(g) reputational risk; and Section 40(1)(h) compliance risk. Section 40(2) A mortgage refinance company shall identify, assess, manage, control and mitigate risks. Section 40(3) A mortgage refinance company shall comply with any risk management guidelines issued by the Bank. - 41
CAPITAL REQUIREMENTS AND LIQUIDITY MANAGEMENT - 41. Market risk
AI-assisted research summary: A mortgage refinance company must not engage in activities that may expose it to foreign exchange, commodity or equity risks, nor use financial derivatives except for hedging.
Section 41. Market risk Section A mortgage refinance company shall not engage in activities that may lead it to incur foreign exchange, commodity or equity risks, or use financial derivatives except as hedging instruments. - 42
CAPITAL REQUIREMENTS AND LIQUIDITY MANAGEMENT - 42.[Revoked byLN 30 of 2020, r.3]
AI-assisted research summary: Section 42 is marked as revoked: "[Revoked byLN 30 of 2020, r.3]"
Section 42.[Revoked byLN 30 of 2020, r.3] - 43
CAPITAL REQUIREMENTS AND LIQUIDITY MANAGEMENT - 43. Prohibited activities
AI-assisted research summary: Prohibits engaging, alone or with others, in wholesale or retail trade, including import or export trade, except in the course of satisfying debts due to it.
Section 43. Prohibited activities Section engage, alone or with others, in wholesale or retail trade, including the import or export trade, except in the course of the satisfaction of debts due to it;
Part VIII
REPORTING REQUIREMENTS
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REPORTING REQUIREMENTS - 47. Examinations
AI-assisted research summary: A mortgage refinance company must make its books and records available for inspection and other supervisory purposes when the Bank requests them, within a reasonable period.
Section 47. Examinations Section A mortgage refinance company shall make its books and records readily available for inspection and other supervisory purposes within a reasonable period upon request by the Bank. - 48
REPORTING REQUIREMENTS - 48. Reporting requirements, on-site and off-site monitoring
AI-assisted research summary: Reporting requirements specify quarterly, semi-annual and annual audited financial statements and other Bank-requested information; reports must be submitted within specified periods, statements must follow IFRS and Kenyan standards, and contraventions are an offence with fines or imprisonment.
Section 48. Reporting requirements, on-site and off-site monitoring Section 48(1)(a) quarterly financial statements; Section 48(1)(b) semi-annual financial statements; Section 48(1)(c) annual audited financial statements; and Section 48(1)(d) any other information which, in the opinion of the Bank, is relevant to the discharge of its supervisory role under this regulation. Section 48(2) The reports under sub-regulation (1) shall be submitted no later than thirty days after the end of each reporting period in the case of paragraph (a) and (b) and three months in the case of paragraph (c). Section 48(3) The financial statements shall be prepared in accordance with international financial reporting standards and such accepted Kenyan reporting standards as may be prescribed. Section 48(4) Any person who contravenes the provisions of this regulation commits an offence and is liable, on conviction, to a fine not exceeding five hundred thousand shillings, or to imprisonment for a term not exceeding three years, or to both. - 49
REPORTING REQUIREMENTS - 49. Financial year
AI-assisted research summary: A mortgage refinance company must have a financial year consisting of twelve months ending on 31 December each year.
Section 49. Financial year Section The financial year of a mortgage refinance company shall be the period of twelve months ending on the 31st day of December in each year. - 50
REPORTING REQUIREMENTS - 50. Appointment of external auditor
AI-assisted research summary: Mortgage refinance companies must annually appoint an external auditor (a member of the Institute of Certified Public Accountants of Kenya in good standing and approved by the Bank); they may not remove or change the auditor without the Bank's prior approval. External auditors must report to the Board and submit an audit report to the Bank within three months after each financial year. The Bank may require additional duties of auditors and may remove and replace auditors for non-compliance.
Section 50. Appointment of external auditor Section 50(1) A mortgage refinance company shall, in each year, appoint an external auditor who shall be a member of the Institute of Certified Public Accountants of Kenya in good standing and approved by the Bank. Section 50(2) A mortgage refinance company shall not remove or change its external auditor except with the prior approval of the Bank. Section 50(3) An external auditor shall make a report to the Board of Directors identifying key concerns with respect to the financial condition of the business. Section 50(4) An external auditor shall, within three months after the end of each financial year, submit an audit report to the Bank, on the financial condition of the business. Section 50(5)(a) solvency of the business; Section 50(5)(b) any violation of a condition imposed on the licence; and Section 50(5)(c) any other contravention of the Act or these Regulations. Section 50(6) The Bank may require an external auditor to undertake such additional duties as may be determined from time to time. Section 50(7)(a) there has been a serious breach of or non-compliance with the provisions of the Act, or the regulations, guidelines or other matters prescribed by the Bank; Section 50(7)(b) a criminal offence involving fraud or other dishonesty has been committed by a mortgage refinance company or any of its officers or employees; or Section 50(7)(c) losses have been incurred which reduce the core capital of a mortgage refinance company by fifty per centum or more, Section 50(8) If an external auditor of a mortgage refinance company fails to comply with the requirements of the Act or these Regulations, the Bank may remove the auditor from office and appoint another auditor. - 51
REPORTING REQUIREMENTS - 51. Form of accounts
AI-assisted research summary: Mortgage refinance companies must record and keep all entries and accounts in English using the numerals used in Government accounts; the Bank may at any time issue directions requiring such companies to maintain additional books, records or information, and companies must comply with such directions.
Section 51. Form of accounts Section 51(1) All entries in any books and all accounts kept by a mortgage refinance company shall be recorded and kept in the English language, using the system of numerals employed in Government accounts. Section 51(2) The Bank may, at any time, issue directions to a mortgage refinance company requiring it to maintain such books, records or information, in addition to any books, records or information then already maintained by it, as the Bank may consider to be necessary. Section 51(3) The financial statements shall be in accordance with international financial reporting standards, including applicable consolidated accounting principles for groups. - 52
REPORTING REQUIREMENTS - 52. Accounts to be exhibited
AI-assisted research summary: Mortgage refinance companies in Kenya must exhibit their last audited financial statements and officers' names in every office and branch, and must publish the balance sheet and audited income statements within three months after each financial year.
Section 52. Accounts to be exhibited Section 52(1)(a) exhibit throughout the year in a conspicuous position in every office and branch in Kenya a copy of its last audited financial statements which shall be in conformity with the minimum financial disclosure requirements prescribed from time to time by the Bank together with the full and correct names of all persons who are officers of the mortgage refinance company in Kenya; and Section 52(1)(b) within three months of the end of each financial year, cause a copy of the balance sheet and last audited income statements for that financial year to be published in a newspaper with wide circulation. Section 52(2) The financial statements shall be in keeping with International Financial Reporting Standards, including applicable consolidated accounting principles for groups. - 53
REPORTING REQUIREMENTS - 53. Uniform underwriting standards
AI-assisted research summary: A mortgage refinance company must set and uphold underwriting standards to grant loans to primary mortgage lenders.
Section 53. Uniform underwriting standards Section A mortgage refinance company shall set and uphold underwriting standards for the purpose of granting a loan to a primary mortgage lender. - 54
REPORTING REQUIREMENTS - 54. Information sharing
AI-assisted research summary: The Bank may disclose information it receives while performing its duties to domestic or foreign financial, fiscal/tax, or fraud investigation agencies when reasonably required, but sharing outside Kenya requires a reciprocal arrangement.
Section 54. Information sharing Section The Bank may disclose any information received in the performance of its duties or responsibilities under the Act to any financial regulatory authority, fiscal or tax agency or fraud investigations agency within or outside Kenya, where such information is reasonably required for the proper discharge of the functions of the Bank or the requesting financial regulatory authority, fiscal or tax agency or fraud investigations agency: Provided that the sharing of information with institutions outside Kenya shall only apply where there is a reciprocal arrangement. - 55
REPORTING REQUIREMENTS - 55. Powers of the Bank to issue directions
AI-assisted research summary: The Bank may issue directions to mortgage refinance companies (including appointing advisers whose advice is treated as a Bank direction), may serve a notice to show cause before issuing directions, and mortgage refinance companies must comply within any period specified and produce evidence if required.
Section 55. Powers of the Bank to issue directions Section 55(1)(a) the business of a mortgage refinance company is being conducted in a manner contrary to or not in compliance with the requirements of the Act, these Regulations or guidelines issued by the Bank or in any manner detrimental to or not in the best interests of its creditors or members of the public; or Section 55(1)(b) give advice and make recommendations to the mortgage refinance company with regard to the conduct of its business generally; Section 55(1)(b)(i) give advice and make recommendations to the mortgage refinance company with regard to the conduct of its business generally; Section 55(1)(b)(ii) issue directions regarding measures to be taken to improve the management or business methods of the mortgage refinance company or to secure or improve compliance with the requirements of the Act, the Regulations or guidelines issued or any other written law or regulations; Section 55(1)(b)(iii) in any case to which paragraph (b) applies, issue directions to the institution, officer or other person to cease such practice; Section 55(1)(b)(iv) appoint a person, suitably qualified and competent in the opinion of the Bank, to advise and assist the mortgage refinance company generally or for the purposes of implementing any directions under subparagraphs (ii) and (iii) and the advice of a person so appointed shall have the same force and effect as a direction made under subparagraphs (ii) and (iii) and shall be deemed to be a direction of the Bank. Section 55(2) The Bank may, before issuing a direction under sub-regulation (1), serve upon the mortgage refinance company, officer or other person, a notice of such intent specifying the reasons therefor and requiring the mortgage refinance company, officer or other persons, within such period as may be specified in the notice, to show cause why such direction should not be issued. Section 55(3) A mortgage refinance company which receives a direction under the provisions of this regulation shall comply with the direction within such period as may be specified in the direction and, if so required, shall produce evidence that it has done so. Section 55(4)(a) the standards to be adhered to by a mortgage refinance company in the conduct of its business; and Section 55(4)(b) guidelines to be adhered to by mortgage refinance companies in order to maintain a stable and efficient banking and financial system. - 56
REPORTING REQUIREMENTS - 56. Power to intervene in management
AI-assisted research summary: The Bank must take over management of a mortgage refinance company in specified circumstances and may appoint an officer or other person to manage it.
Section 56. Power to intervene in management Section 56(1)(a) if the mortgage refinance company fails to meet any financial obligation, when it falls due including an obligation to pay any creditor; Section 56(1)(b) if a petition is filed, or a resolution proposed, for the winding up of the mortgage refinance company or if any receiver or receiver and manager or similar officer is appointed in respect of the mortgage refinance company or in respect of all or any part of its assets; Section 56(1)(c) if the auditor of a mortgage refinance company makes a report to the Bank that a mortgage refinance company has violated the law in a serious manner or conducts its business in a detrimental way; Section 56(1)(d) if the Bank discovers (whether on an inspection or otherwise) or becomes aware of any fact or circumstance which, in the opinion of the Central Bank, warrants the exercise of the relevant power in the interests of the mortgage refinance company or its creditors; Section 56(1)(e) if the mortgage refinance company is significantly undercapitalized; or Section 56(1)(f) to submit a capital restoration plan or a plan to resolve all deficiencies as directed by the Bank; or Section 56(1)(f)(i) to submit a capital restoration plan or a plan to resolve all deficiencies as directed by the Bank; or Section 56(1)(f)(ii) to add more capital, and it fails, neglects or refuses to comply, with an order to implement a plan of correction. Section 56(2) The Bank shall take over the management of a mortgage refinance company and may appoint an officer of the Bank or any other person to manage the mortgage refinance company in such manner, for such purpose and for such period as may be determined in the guidelines. - 57
REPORTING REQUIREMENTS - 57. Sanctions
AI-assisted research summary: Monetary penalties may be imposed on a mortgage refinance company and its directors, officers or employees for noncompliance, not exceeding amounts under section 57(2) of the Act.
Section 57. Sanctions Section monetary penalty on a mortgage refinance company, its directors, officers or employees responsible for noncompliance in such amounts not exceeding the amounts provided for under section 57(2) of the Act; - 58
REPORTING REQUIREMENTS - 58. Voluntary liquidation
AI-assisted research summary: A mortgage refinance company may voluntarily liquidate with the Bank's approval if it can meet its liabilities; the Bank approves if satisfied of solvency; upon approval the company must cease operations except for asset realisation and settling obligations; shareholders' liability for uncalled subscriptions continues until the end of liquidation; secured creditors are paid first and other creditors ranked under the Companies Act.
Section 58. Voluntary liquidation Section 58(1) A mortgage refinance company may, with the approval of the Bank, voluntarily liquidate itself if it is able to meet all its liabilities. Section 58(2) An application for the Bank's approval for the purposes of sub-regulation (1) shall be in such form as may be determined. Section 58(3) The Bank may, upon receipt of an application under sub-regulation (2), approve the application if satisfied as to the solvency of the mortgage refinance company. Section 58(4) Where the Bank approves an application by a mortgage refinance company under this regulation, such mortgage refinance company shall forthwith cease all its operations except such activities as are incidental to the orderly realisation, conservation and preservation of its assets and settlement of its obligations. Section 58(5)(a) the liability of the shareholders of the mortgage refinance company for uncalled subscriptions to the capital stock of the mortgage refinance company shall continue until the end of the liquidation process; and Section 58(5)(b) the mortgage refinance company shall first discharge its liability to its secured creditors and thereafter rank all other creditors in accordance with the provisions of the Companies Act. Section 58(6) The Bank shall upon approval of a voluntary liquidation, follow up with the mortgage refinance company to ensure smooth execution of the liquidation process.
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The Central Bank of Kenya (Mortgage Refinance Companies) Regulations, 2019
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