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Eight banks on CBK watch over Sh3bn core capital rule
Central Bank of Kenya (CBK) Deputy Governor Dr Susan Koech speaking at the 42nd Institute of Certified Accountants of Kenya (ICPAK) annual conference in Mombasa on May 21, 2025. She says CBK is closely monitoring eight commercial banks which have not complied with the Sh3 billion core capital saying they need to outline how they will meet this year's requirement.
The Central Bank of Kenya (CBK) is closely monitoring eight commercial banks which have not complied with the Sh3 billion core capital saying they need to outline how they will meet this year's requirement.
The banking regulator said it is worried of the banks which have not met the criteria, saying the increase of the core capital is meant to boost confidence in investors in the country.
CBK Deputy Governor Susan Koech said 24 commercial banks have reached the target and they need to work to reach the Sh10 billion core capital by 2029.
Speaking during the 42nd Institute of Certified Accountants of Kenya annual conference in Mombasa, Dr Koech said the banks need to comply with the Business Laws (Amendment) Act, which brought changes in the Banking Act, the CBK Act, and the Microfinance Act, aimed at strengthening the banking sector.
“With strong core capital in our banks, Kenya will build confidence in foreign investors who are willing to invest in our country. The law calls for a tiered capital threshold in all commercial banks, starting with Sh3 billion by the end of 2025,” said Dr Koech.
Commercial banks failing to meet the requirement may face consequences like dividend freezes or even forced into mergers or buyouts by larger institutions.
Since 2012, commercial banks have maintained a minimum core capital of Sh1 billion. However, a previous attempt to raise it to Sh5 billion in 2015 was unsuccessful.
The push for higher capital requirements follows a similar move in Uganda, which recently raised its minimum core capital to Sh5.1 billion.
At the same time, Dr Koech has warned banks which are not lowering lending rates in response to the CBK’s cutting its benchmark interest rate, saying disciplinary action will be taken against those institutions.
"When CBK increased lending rates, commercial banks were quick to adjust loans upwards but we are not seeing this when we lower it,” she said.
“CBK has taken a number of initiatives by further reducing the Central Bank Rate (CBR), an action aimed to stimulate the economy by making borrowing cheaper for businesses and individuals but some banks have failed to reduce their base lending rates, we are closely monitoring their activities,” she warned.
A few months ago, Kenya Bankers Association in a statement said the process of lowering loans will take time since determining lending rates is guided by a risk-based credit pricing model, in which each bank assesses the borrower’s risk profile and adjusts the loan interest rate accordingly.
Loan pricing is influenced by a bank’s base rate as well as a customer-specific risk premium.
The base rate reflects key factors such as the Central Bank Rate and the cost of government borrowing, while the risk premium considers the customer’s credit risk, which can be influenced by their credit history, ability to repay, and the general economic environment.
Borrowers with strong credit profiles receive lower rates, while higher-risk customers are charged a premium.
