UBA Kenya is one of twelve commercial banks penalized by the CBK for various regulatory infractions, with its core capital-to-deposit ratio plummeting from 29.46% in 2022 to 7.92% in 2023, despite a reduction in losses.
The bank disclosed a pre-tax loss of $2.6 million (KES344 million), a decrease from the previous loss of $3.3 million (KES437 million).
Other banks that also failed to meet the requirements include Housing Finance, a mortgage lender, and the state-owned Development Bank of Kenya. The CBK mandates that banks maintain a minimum of 10.5% for the core capital to risk-weighted assets ratio, 14.5% for total capital to risk-weighted assets, and 8% for the core capital to deposits ratio.
According to the CBK's banking sector report, “Twelve commercial banks were found to be in violation of the Banking Act and CBK Prudential Guidelines as of December 31, 2023, down from thirteen as of December 31, 2022.”
The CBK noted that many violations were related to breaches of the single obligor limit, attributed to the depreciation of the Kenyan Shilling against the US Dollar and a decline in core capital among banks that continue to incur losses.
Spire Bank, which was taken over by Equity Group in 2023, and Consolidated Bank also failed to meet the core capital requirement of $7.7 million (KES1 billion) and did not satisfy the 10.5% core capital to total risk-weighted assets ratio.
These infractions occur as the CBK plans to increase the minimum capital requirement for commercial banks significantly to $77.8 million (KES10 billion). This adjustment, which may pose challenges for smaller banks, aims to enhance resilience against potential financial risks, including rising cyber fraud threats and economic shocks, as stated by the CBK in June.