Christ Yoder
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EXPIRY OF EMERGENCY MEASURES ON THE RESTRUCTURING OF LOANS FOR
BANKING BORROWERS
On March 18-24, 2020, the Central Bank of Kenya (CBK) announced emergency measures to mitigate the negative economic effects of the coronavirus pandemic (COVID-19) on bank borrowers. Among these measures was restructuring by banks,for a maximum period of one year of loans that were performing as of March 2, 2020, and the provision of regulatory flexibility to banks by the CBK. The measures expired on March 2, 2021.
CBK believes that these measures have been very effective. Borrowers have benefited from a variety of restructuring options, including an extension of the repayment period, a moratorium on principal or interest, and waivers of interest or charges. The measures have enabled borrowers to weather the pandemic, mitigate job losses and pivot their business models towards the new normal. For banks, the measures have left time to build additional capital and liquidity reserves to help them get through the pandemic period and beyond.
In total, since March 2020, loans amounting to Ksh 1.7 trillion have been restructured at the end of February 2021, representing 57% of gross loans in the banking sector. After the resumption of repayments and some repayments, the outstanding amount of restructured loans at the end of February stood at Ksh 569.3 billion, or 19% of total gross loans. Over 95% of outstanding restructured loans are repaid in accordance with the restructured terms.
The one-year period for emergency measures on loan extension and restructuring ended on March 2, 2021, after which standard loan classification and provisioning procedures would apply. Specifically, banks will assess, from March 3, 2021, the performance of all restructured loans that were performing before March 2, 2020. The period for determining the performance of all restructured loans will begin on March 3, 2021. This includes restructured loans. which were in operation on March 2, 2020 but became arrears after that date. Therefore, in accordance with usual procedures, borrowers whose loans were performing before March 2, 2020 but have been restructured and subsequently become arrears, will have three months (until June 3, 2021) to regularize their loans.
The CBK will continue to closely monitor the unwinding of outstanding restructured loans in order to ensure the continued stability of the banking sector.
VSENTRANCE BSHIT KENYA
March 23, 2021
