Options after CBK freezes bank licensing


The ban on licensing of new banks opens wide the mergers and acquisitions window as the only option for new entrants seeking a share in Kenya’s banking sector.

Central Bank of Kenya Governor Patrick Njoroge said while an indefinite freeze had been placed on issuance of new permits, mergers, takeovers and acquisitions were exempted from the ban.

This follows an announcement by the Privatisation Commission that Consolidated, Development and National banks were considering a merger ahead of their sale, via ceding of a controlling stake to a yet-to-be disclosed multinational lender.

Dr Njoroge said resolution of existing banks is also allowed, leaving many hopeful entrants mulling over the next course of action.

“The Central Bank of Kenya has, with immediate effect placed a moratorium on the licensing of new commercial banks until further notice. This moratorium, however, does not apply to cases relating to resolution, amalgamation and acquisitions,” said a statement from the regulator yesterday.

Fast-rising Rafiki Microfinance Bank, which was licensed as a deposit taking institution (DTI) on June 14, 2011, and boasts of 17 branches, will have to wait longer even as it continues making a foray in the mainly agricultural Central and Rift Valley regions.

This year has also seen the market regulator license three new entrants — Choice, Caritas and Daraja — as DTIs, all based in Nairobi.

They join five others that have become DTIs since 2010.


These are U&I Microfinance Bank Ltd (two branches) licensed on April 8, 2013; Sumac, with three outlets that started operations on October 29, 2012; Remu, with three branches established on December 31, 2010; Uwezo (November 8, 2010) and Century (September 17, 2012).

While the National Bank has denied knowledge of the impending merger with the other two State-owned banks, the Privatisation Commission is yet to make its decision known, although it has placed the three institutions in consideration for impending sale.

The indefinite suspension comes hardly two months after the closure of the 28-branch-strong Imperial Bank over banking malpractices.

In a statement to the press, CBK said the freeze order would be reconsidered at a later date.

All ongoing discussions on planned mergers and acquisition by local or foreign banks are immune to the order, said the CBK.

The Central Bank has been in the limelight recently, following the closure of Imperial and Dubai banks, which are currently being managed by the Kenya Deposit Insurance Corporation.

Dr Njoroge had earlier said Imperial Bank directors had expressed interest in recapitalising the lender to facilitate its reopening later this month.

The Imperial Bank saga threw the industry into uncertainty, as Kenyans with large sums of money in small institutions transferred them to the large ones

The governor has since assured depositors at the two banks currently under receivership that their funds are safe.