The Central Bank of Kenya (CBK) has identified seven commercial banks operating in Kenya that failed to maintain the minimum core capital threshold of KSh 3 billion as of December 31, 2025. This information was disclosed in the CBK's Bank Supervision Annual Report for 2025. The report highlights a significant increase in regulatory breaches across the banking sector, rising from 11 in 2024 to 35 in 2025.
The seven banks in question are in violation of Section 7(1) of the Banking Act. The CBK's report also reveals that five banks failed to maintain the required total capital to total risk-weighted assets ratio of 14.5%. Additionally, four banks did not meet the core capital to total risk-weighted assets ratio of 10.5%, and three banks fell short of the core capital to total deposit ratio of 8%.
The surge in violations is attributed to non-compliance with Risk-Based Credit Pricing Models, breaches of the single obligor limit, and failure to meet the absolute minimum capital requirement of KSh 3 billion. Smaller banks have faced significant pressure from rising operational costs, shrinking margins, and stiff competition from larger institutions. This has made it increasingly difficult for them to raise capital from existing shareholders or attract fresh investors.
The CBK report does not disclose the names of the specific banks in breach. However, lenders found in violation face potential restrictions on lending, dividend payments, and expansion. In extreme cases, licence revocation is a possible consequence. The regulator is expected to continue engaging with the affected institutions and monitoring their progress towards meeting the required thresholds.
In related news, the CBK penalized 33 commercial banks for failing to comply with its Risk-Based Credit Pricing Model (RBCPM). The regulator conducted targeted inspections in 2025 to assess how lenders had implemented the framework, which requires interest rates to reflect individual borrowers' credit profiles. Only three banks were found to be fully compliant.
The CBK's 2025 Bank Supervision Annual Report also shows that KCB Bank Kenya had the largest gross loan book in 2025, with lending exceeding KSh 1 trillion. This accounts for nearly a quarter of the banking sector's gross loans. The report provides a comprehensive overview of the banking sector's performance and highlights areas of concern for regulators.
The CBK is expected to continue its engagement with the affected banks to ensure they meet the required capital thresholds. The regulator's actions aim to maintain stability and soundness in the banking sector. Banks that fail to comply with regulatory requirements may face significant consequences, including restrictions on their operations.
Key points
- Seven commercial banks in Kenya were found to be operating below the minimum core capital level of KSh 3 billion.
- The banking sector in Kenya saw a significant increase in regulatory breaches, rising from 11 in 2024 to 35 in 2025.
- The CBK penalized 33 commercial banks for failing to comply with its Risk-Based Credit Pricing Model.
