Banks will have to increase their core capital from Sh1 billion to Sh5 billion over the next four years if Parliament adopts new amendments to the Banking Act.
Kiambu Town MP Jude Njomo, the architect of the interest rate capping law, wants banks to have minimum capital of Sh2 billion by December 31, 2019, Sh3.5 billion (2020) and Sh5 billion (2021).
He wants the changes approved through the Finance Bill, 2018 to create stronger banks.
The move is set to force mergers and acquisitions as smaller lenders seek to survive.
“The core capital of at least Sh5 billion by December 31, 2021, in the case of a bank or a mortgage finance company,” notes the amendments.
Mr Njomo says the changes are necessary in creating financial stability.
Consolidation
Central Bank of Kenya data show that 23 of 43 local banks had their core capital at less than Sh5 billion as at December.
The Treasury has in the past supported consolidation triggered by a rise in core capital, arguing it would lead to stronger, better capitalised lenders to support more investment.
CBK earlier rejected Treasury’s move to increase bankers’ capital, saying it would lock out smaller lenders which offer niche services and products.
It will be the second time in as many years that parliament has rejected the plan, having thrown out a similar move in August 2015.
MPs have twice rejected the Treasury proposals to raise banks’ capital to Sh5 billion — in 2016 and 2015.
“This will protect the banks from those who pretend to be banks and engage only in internal lending and money laundering. You are either a bank or a microfinance,” he said.
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