The Central Bank of Kenya (CBK) has recently reported that UBA Kenya has breached capital requirements by failing to meet the minimum core capital-to-deposit ratio of 8%. This breach was attributed to ongoing losses within the bank, leading to a significant drop in its core capital-to-deposit ratio from 29.46% in 2022 to 7.92% in 2023. Despite efforts to reduce losses, UBA Kenya reported a pre-tax loss of $2.6 million (KES 344 million), an improvement from the previous year.
UBA Kenya is not the only commercial bank facing regulatory breaches, as Housing Finance and Development Bank of Kenya have also been cited for violations. The CBK mandates that lenders maintain specific ratios, including a minimum core capital to risk-weighted assets ratio of 10.5% and a total capital to risk-weighted assets ratio of 14.5%. The breaches observed in these banks were mainly due to depreciation of the Kenya Shilling against the US Dollar and a decline in core capital resulting from continued losses.
In addition to UBA Kenya, cash-strapped Spire Bank and Consolidated Bank have also failed to meet core capital requirements set by the CBK. As a response to these breaches and to strengthen resilience against financial risks, the CBK is planning to raise the minimum capital requirement for commercial banks to $77.8 million (KES 10 billion). This move, expected to challenge smaller banks, aims to mitigate threats such as cyber fraud and economic shocks.
The banking sector in Kenya is facing increasing scrutiny from regulatory bodies, with the CBK actively monitoring compliance with capital requirements and prudential guidelines. It is crucial for banks to address issues related to capital adequacy and financial stability to ensure the overall health of the banking industry in Kenya.
Source: https://techcabal.com/2024/10/28/kenya-central-bank-uba/
