The Kenya Bankers Association (KBA) has warned that 24 small and medium-sized local banks risk shutting down. Consequently, the Association has indicated that the move will affect 6,779 employees.
The association’s representatives made the revelation while making the Sector’s submissions on the Business Laws (Amendment) Bill, 2024.
Further, they indicated that the government wants to increase the minimum required core capital, the amount of money a bank must have to operate, from Ksh1 billion to Ksh10 billion in the next three years.
“This will increase core capital from Ksh1 billion to Ksh10 billion within 3 years deadline.”
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What This Means for Banks and Employees
Core capital is essentially the money that a bank’s owners invest, which helps ensure the bank’s stability and solvency.
The proposal means that the banks would have 3 years to meet this new requirement, meaning they must raise an additional Ksh9 billion in capital by the deadline.
However, if the banks cannot meet this new requirement, they risk being shut down.
According to the Kenya Bankers Association (KenyaBankers), up to 24 local banks could be forced to close, which would lead to the loss of jobs for 6,779 employees.
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Other Proposals Made by the Association
At the same time, the Association urged the Committee to consider suspending the proposed amendment of Sec 3 of the Bill relating to the Management of Foreign Direct İnvestments under the Banking Act.
According to KBA, the move should be put on hold until a comprehensive plan is developed.
Also, KBA indicated that the proposed fines for non-compliance set at Ksh20 million, applicable to the Credit Reference Bureau (CRB) may lead to higher costs of obtaining CRB reports.
They have also called for the standardization of the penalties for Banks with those applied to other corporates, to ensure fairness and equity in the enforcement of compliance measures.
“İn relation to the proposed amendment of Section 10 of the Banking Act, the Association has submitted the proposed fines for non-compliance at Ksh20 million, applicable to CRB may lead to higher costs of obtaining CRB reports, while the individual fine of Kes 1M is unwarranted,” a statement from the senate read in part.
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