Apex court retains verdict giving Treasury power over bank rates

The judges said they were not persuaded that there was justification to review the judgment since there was no error or indication that the court had been misled into giving the verdict.

“The invitation to review the judgment on the basis of Legal Notice No.35 in which the Cabinet secretary delegated his powers under Section 44 of the Act to the governor of CBK (Central Bank of Kenya) cannot prevail against an express statutory provision which assigns the responsibility or authority of restricting the increase in banking rates to the Cabinet Secretary,” the court said in a March 14, 2025 decision.

Other judges on the bench were Justices Mohammed Ibrahim, Smokin Wanjala, Isaac Lenaola, and William Ouko.

“As a result, the Cabinet secretary as the delegating authority remains accountable for the outcome of the delegated power, and the Cabinet secretary can only donate his authority but not responsibility,” they said.

Stanbic sought the review on the basis that the declaration had the effect of nullifying the prevailing legal regime, under which the power of the Cabinet secretary has been delegated to the CBK governor.

The Supreme Court had in its ruling in June 2024 said: “Banks/financial institutions are required to seek the (Treasury) Cabinet secretary’s approval under Section 44 of the Banking Act prior to increasing interest rates on loans and/or facilities advanced.”

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Through its head of legal, Janet Wanjohi Kabiru, Stanbic Bank told the Supreme Court that various legislative developments have taken place since 2003 in implementing the legal provision.

She said following the developments, the powers granted to the Cabinet secretary under Section 44 of the Banking Act were delegated to the CBK governor through Legal Notice No 35 of 2006 by Kimunya.

Asking for clarification, she explained that the Governor of CBK’s authority cannot be exercised jointly by the Cabinet Secretary, nor can they be exercised by the Cabinet Secretary alone.

But the court ruled that despite the delegation of power, the Cabinet Secretary for Treasury retains the residual authority.

The judges added that the application failed to meet the Supreme Court rules and principles on review of any of its decisions.

They observed that the bank instead suggested that there was an oversight or omission by the court in its judgment by finding that banks or other financial institutions are required to seek the Cabinet Secretary’s approval on loan interest rate increment, while in their view such approval ought to be sought from the Governor of CBK in terms of the prevailing law.

"There is, therefore, no suggestion that our judgment under review was obtained through fraud, deceit, or misrepresentation of facts; or that the court was misled into giving it; or that it was rendered on the basis of repealed law, or as a result of a deliberate concealment of a statutory provision," said the bench.

The case stemmed from a dispute between Stanbic Kenya Limited and its customer Santowels Limited over allegations of overcharging interest on the facilities granted to the customer between 1993 and 1997.

Their relationship became difficult in 2002 as the customer began having doubts concerning the interest charged by the bank.

Consequently, the customer paid the outstanding debt, closed its accounts with the bank in the same year, and later engaged Interest Research Bureau (K) Ltd, to audit and verify the accuracy of the interest charged on the facilities.

According to Interest Research Bureau (K) Ltd’s computation, the bank had overcharged interest on the facilities granted to the customer.

The bank disputed the said computation which it termed as inaccurate and denied any liability on its part. This escalated the dispute to a long litigation before the High Court, Court of Appeal, and later at the Supreme Court.

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