Kenya plans to increase capital requirements for the nation’s banks to protect lenders against risks and bolster them for regional expansion barely a week after peer Nigeria made a similar move.
Proposals on raising the bar may be published in the coming month, central bank Governor Kamau Thugge said in a briefing Thursday following a monetary policy committee meeting that left the benchmark interest rate at 13%.
“I believe very strongly that the capital requirements for banks need to be increased,” Thugge said. “We’ve seen increased risks, whether it’s from climate change or cyber security. So we need very strong banks. We need strong banks that can not only operate in Kenya, but also operate in the region.”
The proposal could kick off consolidation or share offers in Kenya’s banking sector, with some lenders choosing to downgrade their banking licenses.
Nigeria announced a ten-fold increase in capital requirements for some banks to help lenders underwrite more loans and support growth. Uganda also has new requirements which forced three lenders down a tier and three others to enlist new shareholders.
Kenya’s minimum capital requirement for banks is set at 1 billion shillings ($7.6 million). The nation has 38 operating commercial lenders and one mortgage-finance company, according to the central bank.
Commercial banks’ capital adequacy ratio was 18.3% in December, above the minimum 14.5%, it said.
