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Kenyatta's new law sends bank stocks tumbling

Harare - Banking stocks on the Nairobi Stock Exchange fell for the second consecutive day following Wednesday’s decision by Kenyan President Uhuru Kenyatta to sign off a law that caps interest rates on loans.

Despite facing opposition from Patrick Njoroge, governor of the Central Bank of Kenya, Kenyatta on Wednesday signed into law legislation to peg credit costs at 400 basis points above the benchmark central bank rate. The law also compels financial institutions to pay interest of at least 70% of the so-called CBR on deposits. 

The result has, however, been a blood bath on listed banking stocks with the most notable one being KCB Group, Kenya’s largest bank, which tumbled by 10%, the most any security is allowed to fall in a session, to 27 shillings.

By 15:48 on Friday, the Nairobi Stock Exchange website showed that Standard Chartered Bank (SCBK) had dropped by 6.86% to 190.00 shillings.

Other decliners included Equity Group Holdings down 9.92% to 29.50 shillings, Barclays Bank (BBK) down 1.69% to 8.70 shillings and HF Group (HFCK) 9.39% weaker at 14.00 shillings. 

NIC Bank was another victim, having lost 9.43% to 24.00 shillings. CfC Stanbic Holdings bucked the trend, climbing 2.04% to 75.00 shillings.

In signing off the new law, Kenyatta reportedly accused banks of failing to live up to pledges to lower their rates when parliament tried to introduce caps.

Most banks in the country extended loans at a weighted average rate of 18%, and in the process putting borrowing out of reach of many.  

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