The Central Bank of Kenya has imposed a fine on UBA Kenya for failing to meet the minimum core capital-to-deposit ratio, which is set at 8%. This violation is attributed to the bank’s continued losses, according to the CBK.
UBA Kenya, alongside 11 other commercial banks, was penalized for various regulatory breaches. The bank’s core capital-to-deposit ratio plummeted from 29.46% in 2022 to just 7.92% in 2023, despite a reduction in its losses.
UBA reported a pre-tax loss of $2.6 million (KES 344 million), down from $3.3 million (KES 437 million) in the previous year.
Other banks facing penalties include Housing Finance and Development Bank of Kenya. The CBK mandates that lenders maintain a 10.5% minimum for the core capital-to-risk-weighted assets ratio, 14.5% for total capital to risk-weighted assets, and 8% for the core capital-to-deposit ratio.
The CBK’s banking sector report indicated that twelve commercial banks were in violation of the Banking Act and CBK Prudential Guidelines as of December 31, 2023, a decrease from thirteen banks the previous year.
The report highlighted that most violations were linked to breaches of single obligor limits due to the depreciation of the Kenyan shilling against the US dollar and declining core capital in banks continuing to report losses.
Additionally, cash-strapped Spire Bank, acquired by Equity Group in 2023, and Consolidated Bank did not meet the core capital requirement of $7.7 million (KES 1 billion) and fell short of the 10.5% rule for core capital to total risk-weighted assets.
These breaches come as the CBK plans to significantly increase the minimum capital requirement for commercial banks to $77.8 million (KES 10 billion).
This move, aimed at enhancing resilience against financial risks such as cyber fraud and economic shocks, could pose challenges for smaller banks, according to the CBK’s June statement.
