The Central Bank of Kenya (CBK) has announced that it will officially lift the moratorium on the licensing of new commercial banks effective July 1, 2025.
This moratorium, which was introduced on November 17, 2015, was implemented to address concerns related to governance, risk management, and operational inefficiencies within the banking sector. Its primary aim was to create a stable environment that allowed for comprehensive reforms and the strengthening of the financial system.
Legal and regulatory framework
Over the past decade, Kenya’s banking landscape has undergone significant transformation. There have been substantial improvements in the legal and regulatory framework that governs the sector. These advancements have been complemented by increased activity in mergers and acquisitions, as well as the entry of new strategic investors both local and international who have contributed to enhancing the stability and competitiveness of the sector.
In a move to further reinforce the financial strength of institutions operating within the country, the Business Laws (Amendment) Act of 2024 has raised the minimum core capital requirement for commercial banks to Ksh. 10 billion. This higher threshold is expected to ensure that new entrants into the market are well-capitalized and capable of operating sustainably in a complex financial environment. Any institution seeking a banking license after the moratorium is lifted must demonstrate the capacity to meet this enhanced capital requirement.
With stronger capital buffers and improved governance structures, commercial banks in Kenya will be better positioned to absorb shocks and navigate risks arising from global, regional, and local economic dynamics. Moreover, a more resilient banking sector is expected to play a pivotal role in supporting Kenya’s long-term development goals by providing the financing needed for large-scale investments and infrastructure projects.