List of 10 Banks Likely to Close, Merge After Ruto’s New Banking Law
In a significant move to strengthen the financial sector, President William Ruto signed the Business Laws Act 2024, requiring commercial banks in Kenya to maintain a minimum core capital of KSh 10 billion.
This landmark legislation marks the first increase in the core capital requirement in 12 years, since it was raised to KSh 1 billion in 2012.
The new law mandates that banks meet the KSh 10 billion core capital requirement within five years, until 2029. Failure to comply will result in severe penalties, including a fine of up to KSh 20 million or three times the gain from the breach.
To ease the transition, the National Assembly Finance Committee adopted a proposal from the Kenya Bankers Association (KBA) to incrementally increase the core capital by KSh 1 billion each year over the next eight years.
KBA Chief Executive Officer Raimond Molenje expressed support for the gradual increase, emphasizing that it would enhance the stability and resilience of the banking sector.
Molenje highlighted that the policy would enable banks to pursue strategic partnerships without disrupting service delivery.
According to a Central Bank of Kenya (CBK) report, the banking sector’s total core capital stood at KSh 809 billion in 2023, with total assets reaching KSh 6.5 trillion. However, only 15 out of 39 licensed commercial banks currently exceed the KSh 10 billion core capital threshold.
The CBK Bank Supervision Annual Report 2023 identified several banks with core capital below KSh 10 billion, including National Bank of Kenya Ltd, SBM Bank Kenya Ltd, and Ecobank Kenya Ltd, among others.
Banks with core capital below KSh 3 billion face a critical situation and may need to close, merge, or acquire to meet the new requirements. These banks include:
- M-Oriental Bank Kenya Ltd – KSh 2.6 billion
- Credit Bank Plc – KSh 2.5 billion
- Paramount Bank Ltd – KSh 2.4 billion
- Development Bank of Kenya Ltd – KSh 2.3 billion
- HFC Ltd – KSh 2.1 billion
- UBA Kenya Bank Ltd – KSh 2.1 billion
- Middle East Bank (K) Ltd – KSh 1.9 billion
- Access Bank (Kenya) Plc – KSh 1.5 billion
- Consolidated Bank of Kenya Ltd – KSh 540 million
- Spire Bank Limited – KSh 1.7 billion
The CBK will encourage mergers and acquisitions within the banking sector to ensure compliance with the new law. Recent acquisitions include the takeover of Spire Bank by Equity Group Limited and the National Bank of Kenya by Nigeria’s Access Bank.
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List of 10 Banks Likely to Close, Merge After Ruto’s New Banking Law
