In a strategic move to bolster the stability and resilience of Kenya’s financial sector, the National Treasury is actively considering a revision of commercial banks’ core capital requirements. The current minimum threshold, set at Sh1 billion since 2012, is under scrutiny, signaling potential consolidation activities among smaller lenders.
Outlined in the 2024 draft Budget Policy Statement (BPS), this move signifies the government’s dedication to cultivating a robust banking sector capable of supporting substantial projects. In tandem, the Central Bank of Kenya (CBK) is contemplating a comprehensive review of licensing fees for commercial banks and mortgage financiers.
The adjustment aims to fortify the banking sector’s resilience, effectively mitigating the risk of institutional failures. Institutions maintaining a higher core capital buffer are perceived as more robust and less vulnerable to economic downturns.
As of September 2023, Consolidated Bank of Kenya stands as the sole institution falling short of the existing Sh1 billion core capital requirement, facing a deficiency of Sh1.4 billion. Notably, this echoes a 2015 proposal by former National Treasury Cabinet Secretary Henry Rotich, suggesting a fivefold increase in minimum capital requirements to Sh5 billion. However, the proposal faced rejection by Members of Parliament, citing concerns about market concentration.
The impending review acknowledges the evolution of the banking sector since 1990, recognizing the transformative impact of technology and innovations steering banks towards branchless banking. Treasury emphasizes, “The review will consider the changing banking sector landscape, increased supervisory or surveillance costs, and international best practices.”
Industry experts interpret this proposal as a clear commitment to implementing higher capital requirements, positioning Kenya alongside neighboring countries adopting similar policies. Eric Musau, Executive Director of Research at Standard Investment Bank, comments, “There has been talk about consolidation. Maybe this time that element of consolidation is going to happen.”
This move aligns with regional trends, with Uganda already implementing a higher capital adequacy requirement, setting a minimum capital of 150 billion Ugandan Shillings (Sh6.17 billion) to be complied with by the next year. Similarly, Tanzania, South Africa, Nigeria, and Egypt express intentions to adjust their minimum capital requirements, reflecting a broader trend across the African banking landscape. As Kenya navigates this potential shift, industry analysts anticipate a transformative wave in the banking sector, aligning it with contemporary challenges and international benchmarks.
Photo (SHIVRAJ SWAMI via Crypto Times)
By: Montel Kamau
Serrari Financial Analyst
28th December, 2023
Article and News Disclaimer
The information provided on www.serrarigroup.com is for general informational purposes only. While we strive to keep the information up to date and accurate, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
www.serrarigroup.com is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information on the website is provided on an "as-is" basis, with no guarantee of completeness, accuracy, timeliness, or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
In no event will www.serrarigroup.com be liable to you or anyone else for any decision made or action taken in reliance on the information provided on the website or for any consequential, special, or similar damages, even if advised of the possibility of such damages.
The articles, news, and information presented on www.serrarigroup.com reflect the opinions of the respective authors and contributors and do not necessarily represent the views of the website or its management. Any views or opinions expressed are solely those of the individual authors and do not represent the website's views or opinions as a whole.
The content on www.serrarigroup.com may include links to external websites, which are provided for convenience and informational purposes only. We have no control over the nature, content, and availability of those sites. The inclusion of any links does not necessarily imply a recommendation or endorsement of the views expressed within them.
Every effort is made to keep the website up and running smoothly. However, www.serrarigroup.com takes no responsibility for, and will not be liable for, the website being temporarily unavailable due to technical issues beyond our control.
Please note that laws, regulations, and information can change rapidly, and we advise you to conduct further research and seek professional advice when necessary.
By using www.serrarigroup.com, you agree to this disclaimer and its terms. If you do not agree with this disclaimer, please do not use the website.
www.serrarigroup.com, reserves the right to update, modify, or remove any part of this disclaimer without prior notice. It is your responsibility to review this disclaimer periodically for changes.
Serrari Group 2023
