CBK says all banks on course to meet Sh1 billion core capital rule

The Central Bank of Kenya has said commercial banks are unlikely not to meet the Sh1 billion capital threshold required by December 31. The banking regulator said more than 85 per cent of banks have already met the requirement, with the remaining ones having submitted capital build up plans detailing how they will achieve the threshold.

There are 43 operational commercial banks and one mortgage finance company in the country at the moment. “Banks in Kenya do agree with the regulator through a consultative process. So there is no room for default,” the CBK said in a response to queries by the Star seeking to find out the status of the regulatory requirement.

The Banking Act was revised in 2009, requiring banks to progressively increase the minimum core capital from the previous minimum Sh250 million. The minimum core capital required to operate a bank at the moment is Sh700 million as of December 31, 2011. The CBK said this arrangement “was aimed at giving the banks ample time to mobilise and build up resources to meet the required capital.”

“This requirement is intended to strengthen the banking sector and enable it weather periodic shocks and turbulences,” said the CBK communications office. A bigger core capital will also allow banks to take in additional customer deposits, with a statutory requirement capping equity capital at not less than eight per cent of a bank’s total deposit liabilities.