Central Bank suspends licensing of new banks

The Central Bank of Kenya (CBK) has placed a moratorium on licensing of new banks with immediate effect, a statement from the bank said.

It added that

This moratorium, however, does not apply to cases relating to resolution, amalgamation and acquisition of banks.

The decision by the bankers regulators was informed by recent developments in Imperial Bank and Dubai Bank.

Imperial Bank Limited was placed under receivership on 13th October 2015 due to unsafe and unsound banking practices that warranted immediate remedial action by CBK. As at the time of placing the bank under receivership, it controlled a market share of 1.8 per cent and the inappropriate practices at the bank were isolated hence the action does not present a systemic concern for the banking sector.

CBK noted with concern the delay by shareholders to provide adequate assurances for the implementation of the proposals put forth and urged a quick resolution of this matter. The bank had proposed

an injection of new capital by shareholders, the conversion of a percentage of large deposits to equity, and recovery and collateralization of fraudulent loans.

Dubai Bank on its part had liquidation challenges, a more serious concern to the regulator, shareholders, creditors and Kenyans at large. This is because it shows that the bank lacked sufficient resources to actively run the bank.

In its third quarter report ending 30th September 2015, CBK was optimistic that the banking sector is safe and sound. It said

The Kenyan banking sector is foreseen to remain stable and maintain an upward growth trend in the remainder of 2015.

Central Bank has also been closely monitoring the financial markets, with a view to ensuring stable conditions and that the market has adequate liquidity. The bank was emphatic that it stands behind the banking system and will do whatever is necessary to ensure its continued stability.

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