Kenya plans to raise capital requirements for banks after Nigeria
TLDR
- Kenya plans to boost capital requirements for banks to address emerging risks in IT and climate change after Nigeria's move to increase minimum capital for commercial banks.
- Central Bank of Kenya Governor emphasizes the need to raise capital requirements for banks due to heightened risks, including climate change and cybersecurity.
- No specific details provided on the size of the capital increment during the news conference by Central Bank of Kenya Governor.
Following the Central Bank of Nigeria's heightening of minimum capital requirements for commercial banks, Kenya plans to bolster the capital requirements for its lenders. This move aims to address emerging risks in areas such as information communication technology and climate change.
Despite boasting a robust financial sector and witnessing the expansion of its banks across the region over the past two decades, Kenya has observed some institutions facing pressure on their capital adequacy ratios in recent years.
Kamau Thugge, Central Bank of Kenya Governor, highlighted the necessity of increasing the capital requirements for banks due to heightened risks, including those arising from climate change and cybersecurity. However, Thugge did not specify the potential size of the increment during a news conference.
Key Takeaways
Kenya's central bank has expressed concerns about the escalating non-performing loans in the banking sector, which surged to 15.5% of total loans in February this year, up from 14.8% recorded at the end of last year. To address these challenges, a proposal to increase the capital requirements will be released for public discussion within the next month, by legal regulations. Individuals seeking to establish a bank are mandated to maintain a minimum capital of 1 billion shillings ($7.69 million). Existing banks are obliged to uphold a core capital of 10.5% to total risk-weighted assets and a total capital of 14.5% to risk-weighted assets. These measures are aimed at ensuring the stability and resilience of the banking sector amidst evolving economic conditions and emerging risks.
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