The Central Bank of Kenya headquarters in Nairobi. Photo/FILE
By GEORGE NGIGI
In Summary
- Central Bank of Kenya passed new capital adequacy rules that will require banks to maintain a capital buffer of 2.5 per cent over and above the minimum capital adequacy ratios starting June next year.
- The regulator also expects banks to cover their market and operational risks which are pegged on the size of a lender.
- The new capital requirements have seen some lenders such as Fina and Chase Bank tie up with strategic investors, a trend that could catch momentum in the coming months as the race to comply picks up.
Commercial banks are expected to start a new
drive for additional capital in the coming months, to meet new CBK
guidelines set this year.
The Central Bank of Kenya passed new capital
adequacy rules that will require banks to maintain a capital buffer of
2.5 per cent over and above the minimum capital adequacy ratios starting
June next year.
The regulator also expects banks to cover their market and operational risks which are pegged on the size of a lender.
Market risks involve aspects like depreciation of
the shilling and movement in interest rates while the operation risks
factors losses that may result from system breakdown and staff thefts.
The two risk elements are pegged on the bank’s growth, meaning that a
lender will inject additional capital in line with their performance,
which is likely to see them cut their dividend payouts.
“Majority of the banks are saying they will not be
giving out more,” said Standard Investment Bank’s Francis Mwangi in an
interview.
This is despite the lenders continuing to record
improved performance having grown their profit before tax by 14.5 per
cent by end of September.
The new capital requirements have seen some
lenders such as Fina and Chase Bank tie up with strategic investors, a
trend that could catch momentum in the coming months as the race to
comply picks up. The lenders are also looking for management and
boardroom experience to support their growth.
Fina Bank sold a 70 per cent stake to Guaranty
Trust Bank of Nigeria in a Sh8.6 billion deal. Chase Bank ceded
shareholding to Amethis Capital from France and Germany’s DEG in a
Sh1.75 billion deal.
Equatorial Commercial Bank is still out looking for strategic investors to inject additional capital.
The small lenders are also looking for management
and boardroom expertise needed to help them secure big clients
especially in the nascent oil and gas sector.
International players have been interested to join
the Kenyan market with Pakistan MCB Bank having sought regulatory
approval to conduct due diligence in a Kenyan lender while US base JP
Morgan has received approval to set up a representative office in the
country.
Barclays Bank CEO Jeremy Awori had in an earlier interview with Business Daily
said that with many lenders going into the market at the same time in
search of additional capital, some could be forced to pay a high price
to attract suitors.
Small banks are viewed to be riskier than their
larger competitors, forcing investors to demand a premium for their
investment in them.
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