CCP Intermediate Level
Credit Governance and Compliance cheat sheet
Every chapter's key points, formulas and definitions on one page, for the last week before the exam. Each heading links to the chapter that explains it.
Overview of the regulation of financial institutions
- Lending institutions are regulated to protect depositors and the public interest, keep the financial system stable, treat borrowers fairly and maintain confidence in the system.
- Rules-based regulation sets detailed, specific rules such as CBK's numeric prudential ratios: predictable, but open to conduct that meets the letter of a rule and not its spirit.
- Principles-based regulation sets broad principles that lenders apply with judgement, more flexible but less predictable in enforcement; risk-based supervision scales attention to each institution's actual risk profile.
- Kenya has several regulators: CBK for commercial banks and digital credit providers, SASRA for deposit-taking SACCOs, the Microfinance Act framework for microfinance institutions, and the CMA for listed lenders' securities and governance disclosure.
- Before applying any rules to a scenario, identify which regulator's framework it falls under.
Key terms
- Rules-based regulation
- Detailed, specific rules lenders must follow, e.g. CBK's numeric prudential ratios, predictable but can be circumvented by conduct technically compliant with the letter but not the spirit of the rule.
- Principles-based regulation
- Broad principles (e.g. 'lend responsibly') lenders must apply judgement to satisfy, more flexible but less predictable in enforcement.
- Risk-based supervision
- Regulatory attention and intensity scaled to each institution's actual risk profile, rather than uniform treatment of every regulated entity.
- Central Bank of Kenya (CBK)
- Regulates commercial banks, and, since dedicated regulations were introduced, digital credit providers.
- SACCO Societies Regulatory Authority (SASRA)
- Regulates deposit-taking SACCOs (DTS), covered in the chapter on cooperative and sacco lending regulations.
- Microfinance regulators under the Microfinance Act
- Oversee microfinance banks and credit-only microfinance institutions (see the chapter on microfinance lending regulations).
- Capital Markets Authority (CMA)
- Regulates listed lenders' securities and governance disclosure (see the chapter on corporate governance in lending institutions).
The rest of the sheet covers
- Credit policy administration
- Prudential guidelines in lending for banking institutions
- Cooperative and sacco lending regulations
- Microfinance institutions' lending regulations
- Islamic banking
- Measuring the performance of credit assets
- The Basel accords
- Consumer protection
- Corporate governance in lending institutions
- Professional standards, ethics and values
- Exam technique and revision
- Glossary