NAIROBI, Kenya – At least 11 commercial banks in Kenya were penalized by the Central Bank of Kenya (CBK) in 2024 for violating regulatory provisions on lending limits, capital adequacy, corporate governance and investment rules.
The CBK’s Bank Supervision Annual Report shows the institutions breached 10 separate rules, with most violations linked to exceeding the single obligor limit — a cap that restricts lending to a single borrower to no more than 25 per cent of a bank’s core capital.
Nine of the 39 operating banks were cited for this breach, which the regulator partly attributed to declines in core capital among lenders that posted losses.
Tougher Enforcement
The penalties mark a slight improvement from 2023, when 12 banks were fined for violating 11 rules, but reflect the CBK’s heightened scrutiny of the sector.
“Appropriate remedial actions were taken on the institutions in respect of the violations,” the regulator said.
Three banks were sanctioned for allowing an individual to own more than 25 per cent of the institution, in breach of Section 13 of the Banking Act.
This was up from one bank the previous year, underscoring CBK’s push for stronger corporate governance and its wider policy of encouraging bigger, more stable banks through higher capital requirements.
Five banks failed to meet the minimum statutory capital requirement — an increase from four in 2023 — ahead of a planned increase in the minimum core capital from Sh1 billion to Sh3 billion by December 2025.
Insider Lending and Liquidity Gaps
One bank was found to have exceeded the legal cap on insider lending, which limits loans to employees, directors and major shareholders to 100 per cent of core capital.
Two other institutions lent more than 20 per cent of their core capital to a single insider borrower.
The report further revealed that three banks failed to meet the statutory minimum liquidity ratio of 20 per cent.
Core capital is crucial in determining the amount of deposits a bank can accept, currently set at Sh12.50 for every shilling invested by the bank’s owners.
Names Withheld, Penalties Collected
Due to the sensitivity of the banking sector, CBK did not disclose the names of the affected banks or the fines imposed.
Under the Banking Act, institutions can be fined up to Sh5 million and individuals up to Sh200,000 per offence.
In the financial year ending June 2024, the CBK collected Sh191 million in penalties from commercial banks and forex bureaus.
