The core mandate of Bank Supervision Department (BSD) is to foster liquidity, solvency and proper functioning of a stable market-based financial system as stipulated under Section 4 (2) of the Central Bank of Kenya Act. This mandate is aimed at promoting and maintaining the safety, soundness and integrity of the banking system. This is undertaken through the implementation of policies and standards that are in line with international best practice for bank supervision and regulation. BSD has two divisions, Surveillance and Policy. The broad functions of the Department are: -

1. Development of legal and regulatory frameworks to foster stability, efficiency and access to financial services. The Department achieves this objective through:-
   • Continuous review of the Banking and Building Societies Acts and guidelines issued there under which lay the legal foundation for banking institutions and building societies.
   • Formulation and implementation of the Microfinance Act and regulations issued there under which govern the operations of Deposit Taking Microfinance Institutions.
   • Continuous review of guidelines for Foreign Exchange Bureaus licensed under the Central Bank of Kenya Act.
2. The Department processes the licenses of Commercial Banks, Non-Bank Financial Institutions, Mortgage Finance Companies, Building Societies, Foreign Exchange Bureaus, Deposit Taking Microfinance Institutions and Credit Reference Bureaus.
3. The Department conducts onsite evaluation of the financial condition and compliance with statutory and prudential requirements of institutions licensed under the Banking Act, Microfinance Act and Foreign Exchange Bureaus licensed under the Central Bank of Kenya Act. A confidential Inspection Report is prepared after every inspection and discussed with the Board of Directors in the case of banks.
4. The Department carries out offsite surveillance of institutions licensed under the Banking Act and Foreign Exchange Bureaus licensed under the Central Bank of Kenya Act through the receipt and analysis of returns received periodically. The Department also processes corporate approvals for banking institutions in regard to opening and closing of places of business, appointment of directors and senior managers, appointment of External Auditors, introduction of new products/services, increase of charges and reviews annual license renewal applications in accordance with statutory and prudential requirements.