Judge temporarily suspends Treasury loan rate approval rule

The judge said such a decision could also trigger widespread litigation over interest rates charged in the past.

“These issues and losses cannot be easily fixed with damages, making the appeal mostly futile,” the court said.

KBA challenged Section 44, arguing that interest-rate adjustments are a key instrument of monetary policy and that requiring approval from the Cabinet Secretary, even when the Central Bank of Kenya (CBK) directs such adjustments, would give the Treasury CS supervisory or veto powers over the central bank’s monetary operations.

The bankers’ association argued that this undermines the constitutional independence of the CBK, as affirmed by the Supreme Court in March 2025.

KBA said requiring executive approval for interest-rate adjustments infringes on the CBK’s autonomy because such adjustments form an integral part of monetary policy.

The High Court had, however, dismissed the association’s case in December 2025, finding that Section 44 did not interfere with the CBK’s constitutional mandate under Article 231(2) and (3).

The court also held that KBA had failed to demonstrate any inconsistency between the provision and the Constitution.

The association returned to court in January seeking temporary orders pending an appeal. It argued that it was not asking the High Court to reinterpret Section 44, but to determine whether the provision, as interpreted by the Supreme Court, is consistent with Article 231 of the Constitution.

KBA said that although the Supreme Court had previously interpreted and enforced Section 44, that did not amount to a direct determination of the provision’s constitutionality.

The association argued that maintaining the regulatory position that existed during the trial would promote stability in the financial sector while the Court of Appeal determines the dispute.

The court noted that the CBK, Attorney-General and Treasury CS did not file responses or submissions opposing the application, leaving KBA’s factual assertions unchallenged.

“I’m inclined to grant an order of stay for a limited period,” the judge said.

The judge subsequently granted the order suspending the implementation and operation of Section 44, to the extent that it requires financial institutions to obtain prior approval from the Treasury Cabinet Secretary before increasing loan interest rates, pending further directions of the Court of Appeal.

In a December judgment, the judge had held that while the CBK may influence market interest rates, the actual pricing of loans by private banks is a commercial decision.

Parliament, he said, was constitutionally permitted to regulate such commercial conduct to protect consumers and promote fairness in the credit market.

“Section 44, therefore, falls squarely within the realm of consumer and market regulation, not monetary policy,” the judge said.

“I am persuaded that section 44 neither prescribes the monetary-policy rate nor restricts the CBK’s authority to formulate or implement monetary policy. It instead regulates how licensed institutions adjust their commercial lending terms. The provision does not require the CBK to seek approval from any authority, nor does it bind the CBK in any manner,” he said in the December 11, 2025 judgment.