Kenya to raise minimum bank capital 10x to boost lenders

AFRICAN BUSINESS AND ECONOMYJune 15, 2024 at 11:24 PM UTC

TLDR

Central Bank of Kenya to raise minimum capital requirement for commercial banks tenfold to $77.8 million to enhance stability and support regional growth.
Small and mid-sized banks in Kenya may face challenges meeting the new capital requirements, necessitating mergers or stock market capital raises.
Regulatory change highlights CBK's focus on strengthening banking sector stability and reshaping competitive landscape in Kenya.

The Central Bank of Kenya (CBK) is set to raise the minimum capital requirement for commercial banks significantly, increasing it tenfold to $77.8 million (KES 10 billion) to protect lenders against risks and bolster them for regional expansion.

However, the recapitalization move poses challenges for many of the 39 licensed commercial banks in Kenya, especially small and mid-sized institutions. The proposal could kick off consolidation or share offers in Kenya’s banking sector, with some lenders choosing to downgrade their banking licenses.

This marks the second attempt in a decade to revise the minimum capital threshold for lenders. A similar proposal in 2015, which sought to raise the capital requirement to $38.9 million (KES 5 billion), was rejected by parliament.

Key Takeaways

Since 2012, the minimum capital requirement has remained at KES 1 billion, which lags behind the standards set by other major African banking markets. For instance, South Africa requires $90 million, Nigeria $337.1 million, and Egypt $104.7 million. Recently, Uganda raised its minimum capital requirement to $40 million (UGX 150 billion), resulting in downgrades for banks like Nigeria’s GTBank, Kenya’s ABC Capital Bank, and Opportunity Bank. Meanwhile, Tanzania, which last reviewed its core capital requirements in 2013, is considering further adjustments to its banking regulations. These changes across East Africa reflect efforts to enhance financial stability and align banking standards with international norms.

Recapitalization

Kenya

Banking

Bank Recapitalization

Central Bank of Kenya

Economy