The Central Bank of Kenya (CBK) has directed 13 commercial banks to outline their strategies for progressively increasing their core capital to Sh3 billion this year and Sh10 billion by 2032. This was revealed during a virtual post-Monetary Policy Committee (MPC) media briefing on Thursday, as the regulator seeks to strengthen the country’s banking sector.
CBK Governor Kamau Thugge confirmed that the institution had written to the affected banks, requesting detailed plans on how they intend to meet the new capital requirements. However, CBK did not disclose the specific banks under scrutiny.
“We have written to 13 commercial banks with core capital less than Sh3 billion to not only explain how they are going to meet the requirement this year but a detailed report on how they will realize a minimum capital of Sh10 billion in the long run,” Thugge stated.
This move follows the enactment of the Business Laws (Amendment) Bill, signed by President William Ruto late last year, which modified the Banking Act, Cap 488; Central Bank of Kenya Act, Cap 491, and Microfinance Act, Cap 493C. The amendments aim to fortify the banking sector by raising minimum core capital thresholds.
Since 2012, commercial banks in Kenya have been required to maintain a minimum core capital of Sh1 billion. However, previous attempts to raise the threshold to Sh5 billion in 2015 were unsuccessful. According to CBK’s latest banking supervision report, 11 banks, including Bank of Africa, Premier Bank, Habib Bank, M-Oriental Bank Kenya, Credit Bank, Paramount Bank, Development Bank, HFC, UBA, Middle East Bank, and Access Bank, have not yet met the Sh3 billion requirement.
Additionally, Consolidated Bank and Spire Bank, which were recently acquired by Equity Bank Holdings, violated the current Sh1 billion minimum requirement. The new regulations put further pressure on banks to meet the capital adequacy ratios in a challenging economic landscape.
In the region, Uganda recently raised its core capital requirement to Sh5.1 billion, leading to downgrades for several banks, including Kenya’s ABC Capital Bank. The move signals a broader trend in East Africa towards strengthening financial institutions.
Meanwhile, banks have made slight progress in reducing non-performing loans (NPLs), which fell to 16.4 percent in January 2025 from 16.7 percent in September 2024. This is attributed to an improved economic environment, stable currency, and lower lending rates.
The CBK has also taken measures to enhance liquidity, cutting the base lending rate by 50 basis points to 10.75 percent and reducing the Cash Reserve Ratio (CRR) by 100 basis points to 3.25 percent. These actions are expected to further ease credit access and promote economic growth.
