Kenya’s biggest banks could soon face higher capital requirements under proposed Central Bank of Kenya (CBK) rules, raising concerns that the move could increase loan costs.

🇰🇪 Breaking It Down

The proposed regulations target Domestic Systemically Important Banks (D-SIBs), which are considered more important to Kenya’s financial system because their failure could have wider economic consequences.

Under the proposed rules, the largest banks would be required to maintain additional capital buffers, including higher equity levels, before distributing dividends to shareholders.

However, the Kenya Bankers Association (KBA) on Thursday, September 24, raised concerns over the timing of the new rule, arguing that banks are already working towards a Ksh10 billion minimum core capital requirement.

📌 What You Need to Know

KBA CEO Raymond Molenje warned that requiring tier one banks to raise additional capital and liquidity could strain the amount of money available for lending to Kenyans seeking loans.

“When you come in and ask the tier one banks to be able to increase their capital and increase their liquidity ratio, what that means is that the tier one banks will also put some brake on lending to customers,” Molenje said.

The KBA boss argued that the additional requirements could affect credit growth at a time when lending to businesses and households is beginning to recover.

Molenje described the proposed measures as a good idea but questioned whether they should be implemented before banks complete the transition towards the Ksh10 billion capital threshold.

“Good proposal but wrong timing. It needs to wait. We need to first fix the Ksh10 billion for all the banks in Kenya,” he said.

Nonetheless, CBK maintained that Kenya’s banking sector remains stable, with banks holding capital and liquidity levels significantly above the regulatory minimums.

📰 Source: Kenyans.co.ke