 The Central Bank of Kenya was established in 1966 through an Act of Parliament -
the Central Bank of Kenya Act of 1966.
The establishment of the Bank was a direct
result of the desire among the three East African states to have independent monetary
and financial policies. This led to the collapse of the East Africa Currency Board
(EACB) in mid 1960s.
Under the Central Bank of Kenya Act, the responsibility for determining the policy of the Bank, other than the formulation of monetary policy, is given to the Board of Directors. The Monetary Policy Committee of the Bank is responsible for formulating monetary policy.
The Board of Directors of the Bank consists of eight members:-
- the Governor, who is also its chairman
- the Deputy Governor, who is the deputy chairman
- the Permanent Secretary to the Treasury who is a
non-voting member
- five other non- executive directors
All members are appointed by the President to hold office for
a term of four years and are eligible for reappointment once, provided that a Board member shall hold office for not more than two terms. The executive
management team comprises the Governor, the Deputy Governor and fifteen heads of
department who report to the Governor. The Bank operates from its head office in
Nairobi and has branch offices in Mombasa, Kisumu and Eldoret. The Bank also owns
the Kenya School of Monetary Studies (KSMS) which is headed by an executive director
answerable to the Governor.
To be a World Class Modern Central Bank
Section 4 of the Central Bank of Kenya Act states the core mandate of the Bank as follows: (1) the principal object of the Bank shall be to formulate and implement monetary policy directed to achieving and maintaining stability in the general level of prices; (2) the Bank shall foster the liquidity, solvency and proper functioning of a stable market- based financial system; and (3) subject to (1) and (2), the Bank shall support the economic policy of the Government, including its objectives for growth and employment.
The other objectives of the Bank are enumerated under Section 4A of the Act, and empower the Bank to :-
- Formulate and implement foreign exchange policy
- Hold and manage its foreign exchange reserves;
- License and supervise authorized dealers;
- Formulate and implement such policies as best promote the establishment regulation and supervision of efficient and effective payment, clearing and settlement systems;
- Act as banker and adviser to, and as fiscal agent of the Government; and
- Issue currency notes and coins.
In pursuit of the above outlined mandate, the Central Bank operations are organized into the following functional areas:
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