Ladies and Gentlemen, Since 1999, banking institutions in Kenya have been regulated under Basel I Capital Adequacy Accord which was issued by the Basel Committee in 1988 to guide in assessing banks’ capital adequacy requirements. Under this framework, the focus has been largely placed on the credit risk faced by banks.
The 1988 Accord was later amended in 1996 to incorporate a capital charge for the market risk, which we in Kenya and other Central Banks in the region have not adopted. In 2004, the Basel Committee issued the Basel II Capital Accord which, in addition to credit and market risk, introduces a capital charge for operational risks that banks face.