The Central Bank of Kenya (CBK) has reported a significant increase in penalties imposed on commercial banks and foreign exchange bureaus, rising 57.6 percent to Sh93 million in the year ended June 2026. This period coincides with the regulator's tightening of sanctions for breaches of banking rules. The increase is notable compared to the Sh59 million recorded in the previous year, although it remains below the Sh191 million recorded in 2024.
According to the CBK's annual report, the penalties were implemented during a period when the regulator introduced a new penalty framework aimed at making sanctions more effective and dissuasive. The Banking (Penalties) Regulations, 2025, outline specific penalties for violations of the Banking Act, with penalties linked to the seriousness of breaches and the financial benefit obtained or loss avoided. The regulations cover a range of violations, including breaches of minimum capital and liquidity requirements.
The new penalty framework provides for penalties of up to Sh20 million or three times the gross monetary gain made or loss avoided. The CBK stated that the amendment ensures penalties are effective, proportionate, dissuasive, aligned with global standards, and entrench a compliance culture in banks. This move is part of the CBK's efforts to enhance regulatory oversight and enforcement.
In the year ended December 2025, the CBK intensified its scrutiny of how lenders price credit following reductions in the Central Bank Rate (CBR). The regulator fined a record 33 commercial banks after inspections found breaches linked to the implementation of its risk-based credit pricing model. The 33 lenders represented 86.8 percent of the 38 commercial banks inspected, while two other banks faced administrative action.
Only three banks were found to be fully compliant with the model. The inspections followed repeated reductions in the CBR and pressure on lenders to pass lower funding costs to borrowers. The CBK had cut the benchmark rate seven times between August 2024 and August 2025, bringing it down from 13 percent to 9.5 percent. This move was aimed at stimulating economic growth by making borrowing cheaper.
The enforcement push coincided with the rollout of the revised risk-based credit pricing model, which uses the Kenya Shilling Overnight Interbank Average (Kesonia) as the common reference rate for variable rate loans. The CBK's efforts to enhance regulatory oversight and enforcement are ongoing, with a focus on ensuring compliance with banking regulations.
The CBK's annual report highlights the regulator's commitment to maintaining a robust regulatory framework. The increase in penalties imposed on commercial banks and forex bureaus reflects the regulator's efforts to ensure compliance with banking regulations. The CBK's actions are aimed at promoting a stable and sound financial system.
Key points
- The Central Bank of Kenya's penalties on commercial banks and forex bureaus rose 57.6 percent to Sh93 million in the year ended June 2026.
- The CBK introduced a new penalty framework aimed at making sanctions more effective and dissuasive.
- The regulator fined a record 33 commercial banks for breaches linked to the implementation of its risk-based credit pricing model.
