NAIROBI, Kenya – The Central Bank of Kenya (CBK) is proposing tougher regulatory requirements for banks whose failure could pose significant risks to the country’s financial system.
Under a draft framework on Domestic Systemically Important Banks (D-SIBs), the regulator would identify institutions whose financial distress or failure could have wider consequences for Kenya’s banking sector and economy.
The proposed framework is designed to strengthen the resilience of such institutions and reduce the likelihood that their failure could trigger disruption across the financial system.
Size will not be the only measure
CBK says systemic importance would not be determined by the size of a bank alone.
The regulator would assess individual institutions using indicators including size, interconnectedness, substitutability and complexity.
This means a bank could be considered systemically important because of its links to other financial institutions, the critical services it provides or the difficulty of replacing those services if it fails.
The approach is intended to give CBK a broader assessment of the potential impact of a bank’s failure on the financial system.
D-SIBs to hold additional capital
Banks designated as D-SIBs would be required to maintain additional loss-absorbing capital through Common Equity Tier 1 (CET1) capital requirements.
The additional capital buffer would give systemically important institutions greater capacity to absorb losses and continue operating during periods of financial stress.
For banks and investors, one of the key issues will be which institutions CBK ultimately designates as D-SIBs and the additional capital requirements that will apply to each classification.
Enhanced supervision proposed
The framework also provides for enhanced supervision of banks classified as systemically important.
CBK is proposing requirements covering recovery and resolution planning, which are intended to ensure that institutions have credible plans for dealing with severe financial distress or failure.
Such measures could help authorities manage a troubled bank while limiting disruption to customers and the wider financial system.
Rules form part of wider banking review
The D-SIB framework is part of a broader review of Kenya’s banking regulatory regime.
CBK is simultaneously reviewing its Prudential Guidelines, Risk Management Guidelines and related Guidance Notes.
The regulator said the review is aimed at strengthening Kenya’s regulatory framework, improving the resilience of the banking sector and aligning the country’s supervisory regime with international standards and emerging best practices.
Proposed rules not yet in force
The proposed D-SIB requirements are not yet in force.
CBK has opened the draft Prudential Guidelines, Risk Management Guidelines, Guidance Notes and D-SIB framework for public participation before making a final decision on the proposed changes.
Members of the public and other stakeholders have until November 7, 2026, to submit their comments.
The feedback will inform the next stage of the regulatory review before the proposed rules can take effect.
