Kenya: Higher Capital Requirements Will Spur Bank Mergers, Boost Capital – CBK

Nairobi — Central Bank of Kenya (CBK) Governor Kamau Thugge has supported the move to raise capital requirements for banks, stating that it will lead to mergers, create stronger financial institutions, and enhance regional influence.

Thugge emphasized that increasing capital buffers would not only improve individual banks’ stability but also help them manage emerging risks like cybersecurity threats.

“We hope that there will be mergers, and in our view, having stronger banks and a robust capital base will enable them to withstand many other risks, including cybersecurity,” Thugge said.

The initiative is part of a broader strategy to strengthen the resilience of Kenya’s financial sector.

By requiring higher capital reserves, CBK aims to ensure that banks are equipped to handle various challenges and better support regional economic growth.

“This is the new way to have a stronger financial presence in the region, and this can only happen if we have banks with a stronger capital base,” Thugge added.

In the proposed Business Laws (Amendment) Bill, 2024, banks’ will be required to increase their core capitals from Sh1 billion to Sh10 billion in the next three years.

The increase will occur in three phases: Sh3 billion by 2025, Sh6 billion by 2026, and Sh10 billion by 2027.

Parliament is expected to approve the proposal, which aims to ensure the financial stability of the banking sector.

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