The Central Bank of Kenya (CBK) imposed sanctions on nine financial institutions in 2021 for violating key regulatory requirements, marking a decrease from 13 banks cited in 2020, as outlined in a recent analysis of banking compliance. The findings underscore persistent challenges in adhering to prudential standards despite economic recovery efforts following the COVID-19 pandemic.
Regulatory violations included breaches of the single obligor limit, which caps loans to a single borrower at 25% of a bank’s core capital. This rule gained public attention in August 2021 after Deputy President William Ruto claimed a Sh15 billion loan from Equity Bank to a Turkish investor, though the bank later clarified it could only issue up to Sh2.5 billion under guidelines.
Eight banks failed to comply with the single obligor restriction, while two fell short of the Sh1 billion core capital threshold. Additional infractions involved excessive land and building investments, prohibited business activities, and inadequate liquidity ratios. The CBK reported implementing corrective measures against the non-compliant institutions.
Five banks exceeded the 20% liquidity ratio requirement, risking their ability to meet short-term obligations. Two institutions violated foreign exchange exposure limits, and three faced issues with core capital-to-deposit ratios. Insider lending violations were also noted, with some banks exceeding 100% of core capital limits on internal loans.
The 2021 Banking Supervision Report emphasized the CBK’s enforcement role, stating that remedial actions were taken to address non-compliance and safeguard financial stability.
