Kenya: Central bank halts new bank licences

Nov 20, 2015

However, the regulator said it will continue to approve mergers and acquisitions.

The Central Bank of Kenya has suspended the licensing of new commercial banks in a bid to drive consolidation of the banking industry.

The regulator said it will continue to approve mergers and acquisitions.

"The Central Bank of Kenya has, with immediate effect, placed a moratorium on licensing of new commercial banks until further notice," the regulator said in a statement.

Kenya has one of the highest ratio of banks relative to population in the world, standing at 0.93, according to official figures quoted by The Star. There are 41 banks serving about 44 million people, which equates to one bank for every 1.07 million people. In comparison, Nigeria has a ratio of 0.12 and South Africa a ratio of 0.35.

The central bank's decision comes after the closure of Imperial Bank due to "unsafe or unsound business conditions" and possible "malpractices".

Imperial Bank is the second bank in Kenya to be put under management since August, when Dubai Bank Kenya was put in receivership after liquidity problems.

Analysts feared there would be a decline in market confidence towards small and midsize Kenyan banks following the closure of these banks.

Moody's rating agency said in a report that small banks could suffer a hike in their interbank rates as their larger counterparts take steps to reduce their level of exposure.ADNFCR-2976-ID-801806194-ADNFCR