CBK FINES 11 BANKS FOR REGULATORY BREACHES

The Central Bank of Kenya (CBK) has imposed fines totalling Ksh191 million on 11 commercial banks and forex bureaus for breaching regulations related to lending, capital adequacy, and governance. The penalties, which amount to approximately USD 1.48 million, were collected during the year ending June 2024.

While the number of fined institutions decreased from 12 in 2023 to 11 in 2024, CBK emphasized that this still highlights ongoing compliance issues. These enforcement actions come in the wake of legal reforms introduced under the Business Laws (Amendment) Act of 2024, which took effect in December 2024. The new regulations set penalties at Ksh20 million or three times the financial benefit gained or the loss avoided by an institution’s breach.

According to CBK, the updated framework aims to make penalties more effective, proportional, and deterrent, aligning Kenya’s banking penalties with international standards. The regulator explained that the aim is to ensure fines are not seen as a mere cost of doing business but as a strong incentive to comply with regulations.

This crackdown is part of CBK’s broader initiative to promote affordable credit, as outlined in the Kenya Banking Sector Charter. The Charter, established in 2019, emphasizes four key principles: customer-centricity, risk-based pricing, transparency, and ethical banking. It encourages banks to tailor their pricing models to the risk profiles of borrowers, rather than applying uniform high rates. In 2024, CBK continued to work with banks to refine these models. CBK’s Governor stressed that banks should consider customers not just as borrowers but as partners in growth, with good borrowers benefiting from better rates.

Despite the enforcement measures, the banking sector remained stable in 2024, with key indicators showing strong performance. The total capital adequacy ratio stood at 19.6%, well above the minimum required 14.5%, and liquidity was at 56%, nearly three times the 20% minimum. Profits also increased, with pre-tax profits rising by KSh41 billion (18.2%) to KSh260 billion, driven by higher income growth relative to expenses.