Kenya’s Central Bank (CBK) has intensified its regulatory grip on the banking sector, fining 11 commercial lenders and several forex bureaus a combined KES 191 million ($1.48 million) in the year to June 2024 for breaches in lending, capital, and governance rules. The penalties, detailed in the CBK’s latest supervision report, are part of a wider enforcement drive aimed at making credit more affordable and aligning bank practices with monetary policy.
The 2024 fines—slightly lower than the 12 institutions penalised in 2023—underscore CBK’s willingness to use regulatory muscle alongside interest rate cuts. Since February 2024, the Monetary Policy Committee has slashed the central bank rate from 13% to 9.75% to stimulate lending, but policymakers have accused banks of being slow to pass on lower rates to borrowers.
The report shows that the most common violation was breaching the single-borrower limit, which prohibits lending more than 25% of a bank’s core capital to one client. Nine banks crossed the line, in some cases because their capital bases had been eroded by losses. Other offences included:
• Excessive insider lending (loans to directors and significant shareholders).
• Liquidity shortfalls, with three banks falling below the statutory 20% liquidity ratio.
• Ownership breaches, with three lenders found to have individual owners controlling over 25% of shares—up from one in 2023.
• Capital inadequacy, as five banks failed to meet statutory minimums ahead of a planned 2025 increase.
Governance lapses and weak capital buffers are particularly sensitive as the CBK prepares for tighter capital rules next year. The regulator did not name the offending institutions or detail individual penalties, citing market stability concerns.
Since June 2024, CBK has escalated its supervision with on-site inspections and introduced a new deterrent: banks that fail to pass on lower rates to customers risk daily fines of up to KES 100,000 ($774) per violation. The move signals that the regulator is prepared to match monetary easing with direct compliance enforcement to avoid undermining credit stimulus.
The crackdown reflects CBK Governor Kamau Thugge’s dual strategy—loosening monetary policy to spur lending while holding banks accountable for governance and prudential soundness. With a planned capital rule hike in 2025, and pressure to cut borrowing costs mounting, lenders face a more intrusive regulatory environment in the year ahead.
