This law provides basic principles and framework to form, settle, govern and regulate banking institutions.
Part II refers to the formation of banks, giving guidelines for the settling of bank charters, including principles for sound bank management. The Central Bank may determine that a person who already is a director or senior officer of an institution is not a fit and proper person to manage or control the institution and upon the institution being notified in writing of that determination, the person shall, if he is a director or senior officer, cease to hold office.
Part III outlines all prohibited activities. For example, an institution in Kenya shall not grant to any person or permit to be outstanding any advance, credit facility or give any financial guarantee or incur any other liability on behalf of any person, so that the total value of the advances, credit facilities, financial guarantees and other liabilities in respect of that person at any time exceed twenty five per cent of its core capital.
Part IV discusses the capital, reserve requirements and dividends of banks. Parts V and VI expose all auditing and reporting requirements. An institution shall maintain such minimum holding of liquid assets as the Central Bank may from time to time determine. Additionally, the Central Bank may prescribe the minimum ratios which shall be maintained by institutions and banking groups as between their core capital and total capital on one hand and their risk weighted assets (including their total loans and advances).