The Central Bank of Kenya (CBK) report has exposed seven banks engaging in insider lending and breaching the capital adequacy ratios.
Last year’s bank performance review, CBK singled out nine banks that did not have adequate capital buffers, as most of them continued to run empty.
In 2018, Patrick Njoroge, Governor Central Bank of Kenya said that the CBK is ready to crack the whip again on any rogue bank which helps ship out money from public institutions illegally obtained from the graft.
“We took action against some of your institutions because of non-compliance with integrity laws. Make no mistake,” warned Patrick Njoroge.
Four banks were listed for over-indulging in insider lending, a problem that sunk Imperial Bank, Chase Bank and Dubai Bank. Chase Bank has since been acquired by SBM Bank.
The CBK fined five banks sh 331.7 million ($3.1 million) for their role in aiding the movement of the stolen funds.
The penalized banks were KCB Group, the region’s largest bank by assets which was slapped with sh 159.4 million( $1.49 million )fine, Equity Bank sh 95.7 million( $895,000), Standard Chartered Bank-Kenya sh.82.9 million($775,000) and Diamond Trust Bank sh 59.9 million( $560,000).
The office of the Director of Public Prosecutions said it was also preparing charges against bank executives for their alleged role in helping ship out more than $30 million of money stolen from Kenya’s National Youth Service (NYS).
According to the Banking Annual Supervision Report 2019, seven banks had violated the requirement that they restrict investment in land and buildings to 20 per cent of their core capital. Three commercial banks did not have the minimum core capital of Sh1 billion.
Five banks violated Section 18 of the Banking Act and the CBK Prudential Guidelines on capital adequacy.
The Capital Markets Authority (CMA), in a recent report, noted that several financial institutions had previously indicated they would apply their issue proceeds towards meeting core capital requirements as prescribed by CBK.
“To a less extent but also worthy of note, commercial banks and financial institutions, which have traditionally been the most popular issuers of corporate bonds, have been able to comply with Base II financial resource requirements,” said CMA in the report.