Kenya's financial landscape is set for a potential transformation as the central bank signals plans to boost capital requirements for commercial banks, aiming to address risks such as cybersecurity threats and climate change impacts.
Although the East African nation has a robust financial sector, with its banks expanding around the region in the past two decades, it has seen the capital adequacy ratios of some institutions come under pressure in recent years.
"The capital requirements for banks need to be increased. We have seen increased risks whether it is from climate change or cybersecurity," Kamau Thugge, the central bank's governor, told a news conference, without mentioning the potential size of the increment.
Kamau Thugge added that the central bank was concerned about rising non-performing loans in the banking sector, which increased to 15.5% of total loans in February this year from 14.8% at the end of last year.
Kamau Thugge said the proposal to raise the capital will be published next month for a public discussion, in accordance with the legal requirements.
Kenya requires bank start-ups to have a minimum capital of 1 billion shillings ($7.69 million). At the same time, banks already operating are required to maintain 10.5% core capital for total risk-weighted assets and 14.5% total capital for risk-weighted assets.
