President William Ruto recently signed the Business Laws (Amendment) Bill 2024 into law, raising the core capital minimum requirement for commercial banks to KSh 10 billion. This change could lead to the closure or merger of many banks that fail to meet the new threshold by 2029.
The new law requires banks to increase their core capital from KSh 1 billion to KSh 10 billion, with a deadline of 2029. Banks that don’t meet this requirement face a fine of KSh 20 million or three times the financial benefit from the breach.
As of 2023, only 15 out of the 39 licensed banks met the new requirement.
Several banks are currently below the KSh 10 billion mark, including National Bank of Kenya, SBM Bank Kenya, Ecobank Kenya, and UBA.
Smaller banks like M-Oriental Bank, Credit Bank, and Consolidated Bank are at much greater risk, with core capital ranging from KSh 540 million to KSh 2.6 billion.
The Kenya Bankers Association (KBA) supports the new law, stating that it will strengthen the banking sector. KBA CEO Raimond Molenje emphasized that the law allows smaller banks to seek strategic partners to avoid disruption. Over the next five years, many banks may merge to meet the capital requirements.
This law aims to improve the stability of Kenya’s banking sector and align it with global standards.
However, smaller banks face a tough challenge and may need to merge or shut down if they cannot meet the new requirements. The next few years will determine which banks survive and which do not.
By Vivian K.