Seven commercial banks failed to meet Kenya’s minimum core capital requirement of Sh3 billion in 2025, exposing them to breaches of banking regulations, the Central Bank of Kenya (CBK) has reported.
The breaches are contained in the CBK’s Bank Supervision Annual Report 2025, which details cases of regulatory non-compliance recorded in the banking sector as at December 31, 2025.
According to the regulator, the seven institutions contravened Section 7(1) of the Banking Act by failing to maintain the statutory minimum core capital.
“Seven commercial banks were in violation of Section 7(1) of the Banking Act due to failure to maintain the minimum core capital required of Ksh.3 billion,” CBK said in the report.
The capital shortfalls were among several regulatory breaches recorded during the year, including violations involving capital adequacy, lending limits, liquidity, foreign exchange exposure and corporate governance.
Five commercial banks fell below the required 14.5 per cent total capital to total risk-weighted assets ratio, while four failed to meet the 10.5 per cent core capital to total risk-weighted assets ratio.
Three banks also failed to maintain the required eight per cent core capital to total deposits ratio, highlighting continued pressure on capital and balance-sheet requirements among some institutions.
The CBK further reported breaches of lending restrictions designed to limit banks’ exposure to individual borrowers and insiders.
Ten commercial banks exceeded the single obligor limit, which caps lending to one borrower at 25 per cent of a bank’s core capital.
Two banks breached the 20 per cent limit applicable to a single insider borrower, while another exceeded the 100 per cent ceiling on total insider borrowing.
The regulator also identified violations involving banks’ investments in property. Two institutions invested more than 20 per cent of their core capital in land and buildings, contrary to prudential requirements.
Three other banks exceeded the limit on aggregate credit facilities extended to large exposures, which should not surpass five times an institution’s core capital.
Foreign exchange risk management also emerged as an area of concern, with two banks breaching the regulatory limit on foreign exchange exposure. Under CBK prudential guidelines, such exposure should not exceed 10 per cent of a bank’s core capital.
In addition, one commercial bank failed to maintain the statutory minimum liquidity ratio of 20 per cent.
The CBK report also highlights significant compliance gaps in the Risk-Based Credit Pricing Model (RBCPM), which was introduced in 2019 to guide how banks price credit based on the risks associated with individual borrowers.
The regulator conducted targeted inspections across all commercial banks in 2025 to assess compliance with the model.
The inspections resulted in penalties against 33 banks, while administrative action was taken against two others, according to the CBK.
Only three commercial banks were found to have fully complied with the RBCPM requirements.
Also Read: KCB leads banking market as StanChart drops out of top tier
