President William Ruto has signed into law the Central Bank of Kenya (Amendment) Bill, 2026, introducing comprehensive reforms designed to strengthen Kenya’s financial system, enhance banking oversight, and improve the country’s capacity to respond to financial crises.
The new legislation establishes a clear legal distinction between the Central Bank of Kenya’s routine monetary policy operations and Emergency Liquidity Assistance (ELA). This provides a dedicated framework for addressing periods of financial distress while protecting public resources.
According to President Ruto, the reforms are intended to enhance Kenya’s preparedness for financial shocks by ensuring emergency support is only provided under clearly defined circumstances.
“The new law introduces a distinct legal framework separating the Central Bank’s routine monetary policy operations from Emergency Liquidity Assistance (ELA). The move will improve Kenya’s preparedness to respond to financial crises while protecting taxpayers and the banking sector.” he said after signing the bill into law
Under the amendments, emergency liquidity will only be accessible to financial institutions that meet strict requirements regarding solvency, long-term viability, and systemic importance.
“Under the amendment, ELA can only be extended to banks that meet strict conditions on solvency, viability, and systemic risk. The provision aims to separate ordinary liquidity management from extraordinary interventions during periods of financial distress.” he said
The legislation also expands the Central Bank’s mandate by formally recognising financial system stability and sound banking regulation as secondary objectives, while retaining price stability as its primary responsibility. This strengthens the regulator’s role in promoting the integrity, resilience, and proper functioning of Kenya’s financial sector.
Governance reforms are also a prominent feature of the new law, with Presient Ruto confirming that “Nominees for Deputy Governor positions will now be vetted and approved by the National Assembly before appointment. The provision aligns their process with that of the Governor and reinforces parliamentary oversight of senior leadership at the monetary authority.”
The law further grants statutory recognition to the Central Bank of Kenya Institute of Monetary Studies, providing a legal basis for the institution’s training role and facilitating collaboration with regional and international partners to strengthen research, professional development, and knowledge exchange.
Another amendment aligns the Central Bank Act with Kenya’s current financial architecture by replacing references to the former Deposit Protection Fund Board with the Kenya Deposit Insurance Corporation.
Additionally, the legislation clarifies the Central Bank’s authority to hold and trade in gold and other precious metals as part of reserve management.
“It also expands legal clarity on CBK’s authority to deal in gold and other precious metals as part of reserve management. This will support the growth of Kenya’s mining sector and aligns Kenya with practices in Tanzania, Ghana, and South Africa.”
At the same time, President Ruto also assented to the Parliamentary Pensions (Amendment) Bill, 2023, which updates Kenya’s parliamentary pension framework to reflect the country’s bicameral Parliament established under the 2010 Constitution. The new law formally extends pension benefits to members of both the National Assembly and the Senate, ensuring senators are covered under the same legal framework as Members of Parliament.
Key reforms include raising the legal definition of a child eligible for benefits from 16 to 18 years, in line with the Constitution, and reconstituting both the Parliamentary Pensions Management Committee and the Appeals Committee to include representation from both Houses of Parliament.
The law also preserves the existing public service pension policy by retaining gratuity payments only for legislators who serve less than five years.
The Head of State that the legislative changes are intended to strengthen financial governance, modernise Kenya’s monetary policy framework, and align public institutions with constitutional and international best practices.
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