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 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.
However, with the adoption of a new Constitution on August 27, 2010, the Bank became established under Article 231 of the Constitution. Under this Article the Central Bank of Kenya has the responsibility of formulating monetary policy, promoting price stability, issuing currency and performing any other functions conferred on it by an Act of Parliament.
The Mandate of the Bank is derived from the Sections 4 and 4A of the Central Bank of Kenya Act as:-
• To formulate and implement Monetary policy directed to achieving and maintaining stability in the general level of prices.
• To foster the liquidity, solvency and proper functioning of a stable market-based financial system.
• Support the economic policy of the Government, including its objectives for growth and employment.
Without prejudice to the generality of the stated mandates, other objectives of the Bank are:-
• To formulate and implement foreign exchange policy.
• To hold and manage its foreign exchange reserves.
• To license and supervise authorized dealers.
• To formulate and implement such policies as best promote the establishment, regulation and supervision of efficient and effective payment, clearing and settlement systems.
• To act as banker and adviser to, and as fiscal agent of the Government.
• To issue currency notes and coins.