Grace Ashiru
The Central Bank of Kenya (CBK) reported that UBA Kenya breached capital requirements, failing to meet the 8% minimum core capital-to-deposit ratio due to ongoing losses. Three sources with direct knowledge said the CBK also fined the lender; however, UBA stated in a release that it was unaware of any fines.
UBA Kenya is one of 12 commercial banks cited by the CBK for various regulatory breaches, with its core capital-to-deposit ratio dropping significantly from 29.46% in 2022 to 7.92% in 2023, despite reducing its losses.
The bank reported a pre-tax loss of $2.6 million (KES 344 million), an improvement from the previous year’s $3.3 million (KES 437 million) loss.
Other commercial banks breaching regulations alongside UBA include Housing Finance, a mortgage finance bank, and Development Bank of Kenya, a state-owned lender. The CBK mandates that lenders maintain a minimum core capital to risk-weighted assets ratio of 10.5%, a total capital to risk-weighted assets ratio of 14.5%, and a core capital to deposits ratio of 8%.
“Twelve commercial banks were in violation of the Banking Act and CBK Prudential Guidelines as of December 31, 2023, compared to thirteen commercial banks as of December 31, 2022,” the CBK stated in its banking sector report.
“Most of the violations were related to breaches of the single obligor limit, attributed to the depreciation of the Kenya Shilling against the US Dollar and a decline in core capital in some banks that have continued to report losses,” the CBK noted.
Cash-strapped Spire Bank, acquired by Equity Group in 2023, and Consolidated Bank failed to meet the core capital requirement of $7.7 million (KES 1 billion) and did not satisfy the 10.5% core capital to total risk-weighted assets requirement.
The breaches come as the CBK prepares to raise the minimum capital requirement for commercial banks tenfold to $77.8 million (KES 10 billion). This move, which may challenge smaller banks, aims to strengthen resilience against financial risks, such as rising cyber fraud threats and economic shocks, the CBK stated in June.
