East Africa: Regional Banks Face Closer Scrutiny in 2019 to Stem Wave of Closures
East African banks face a tighter regulatory environment in 2019, with central banks moving to protect depositors in weak and undercapitalised lenders and ensure stability in the sector.
The region's central bank governors, at a meeting in Kampala in August, reiterated their commitment to enhancing policy co-ordination to build a strong regional banking sector that can withstand external shocks and reduce bank failures. They have been implementing regulations requiring banks to increase their core capital to withstand financial shocks amid rising non-performing loans.
These requirements are part of efforts by the East African Community partner states to implement the Basel III guidelines, which were introduced globally after the 2008 financial crisis showed banks that they need to be more resilient to credit stress.
Already, the National Bank of Rwanda is reviewing a proposal to quadruple the minimum core capital for banks to Rwf20 billion ($22.6 million), from Rwf5 billion ($5.6 million) while Uganda and Tanzania have also increased the core capital for banks in line with the region's financial sector integration agenda.
Rwandan banks will be expected to build up their core capital to Rwf15 billion ($17.2 million) in the first three years after the publication of the regulations, then add the remaining Rwf5 billion ($5.7 million) in the next two years. In 2007, Kenya increased the minimum core capital for banks to Ksh1 billion ($10 million) from Ksh250 million ($2.5 million), setting December 31, 2012 as the deadline.
However, an attempt by the Treasury Cabinet Secretary Henry Rotich to further increase the bank's core capital to Ksh5 billion ($50 million) by December 31, was met with strong opposition from parliament. Read more on All Africa.
Source: All Africa