Rwanda Raises Banks' Capital Needs, Changes Monetary Policy

(Bloomberg) -- Rwanda’s central bank set out more stringent capital requirements for financial-services companies in the East African nation and announced a change in its monetary-policy framework to better accommodate the country’s needs.

Commercial banks need 20 billion francs ($23 million) of paid-up capital, four times the current requirement of 5 billion francs, while development lenders will need 50 billion francs, National Bank of Rwanda Governor John Rwangombwa told reporters Friday in the capital, Kigali. Institutions have as long as five years to comply with the rules, he said.

The central bank will move to a price-based monetary-policy framework from the current monetary-targeting regime so as to develop a money market, enable economic modeling and forecasting, and strengthen communication with the public to better anchor price expectations, Rwangombwa said.

“The banking and insurance sectors have evolved significantly with regard to size, risks and complexity,” Rwangombwa said. Developments in the financial system “have made interest rates more important in the decision-making process of economic actors.”

The bank was due to announce its key rate next week. Given the changes it made today, it decided to hold its next policy-setting meeting in two months, which means the benchmark rate remains at a record-low 5.5 percent, Rwangombwa said.

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