Influence of the legal and regulatory environment on the business operations of foreign multinational banks in Kenya

Abstract

The prime motivational forces behind globalization are the giant economies of the world, developed countries and multinational companies. The study set out to establish the influence of the legal and regulatory environment on the business operations of foreign multinational banks in Kenya which are a category of MNCs in the banking sector. The study involved the analysis of the different types of laws that govern the operations of foreign MNBs in Kenya, how these laws affect their business operations when compared to their homegrown rivals. A trend analysis was established on the basis of which a descriptive analysis was conducted to determine the influence of the regulatory environment. An overall analysis showed that MNBs operate in a complex legal environment characterised by their home country laws, host country laws, international treaties and other laws formulated by other bodies relevant in the banking sector. This regulatory environment influences their competitiveness and their governance and as a consequence, these banks face some restrictions that do not affect the local banks in Kenya. These banks have therefore put in place structures to ensure completeness and consistency with these set of laws. The research however established that some of these banks do not have in-hose legal departments and made a recommendation that those without should put in place the departments and the CBK should enforce that. The research was also able to establish that Kenya can through CBK borrow a lot from the home country regulations of these banks for purposes of strengthening the governance of the banking sector