This archive report was first published on 6 January 2020.
Published on January 6, 2020, NCBA Group CEO John Gachora has called for higher capital requirements to boost mergers and acquisitions in the banking industry.
Gachora believes that raising the minimum core capital base to KSh 10 billion, from the current KSh 1 billion, would drive more takeovers in Kenya, thereby improving competition among players.
“Raising minimum capital requirements as much as tenfold to 10 billion shillings will force marriages between lenders too afraid of the risks that come with mergers and acquisitions,” Bloomberg quoted John Gachora.
Kenya's banking sector has over 40 commercial banks serving the 47 million population, but only nine banks account for 85% of the sector's pre-tax profit.
According to Gachora, higher regulatory capital needs would encourage takeovers, forming institutions that compete on scale, coverage, and pricing as opposed to margins.
However, in 2016, legislators rejected the call to raise the core capital base for lenders, citing concerns that such changes might slow lending and oppress small banks.
A KBA working paper suggests that increasing the capital base favors competitiveness in a favorable macroeconomic environment.
