The Central Bank of Kenya (CBK) has indefinitely suspended licensing of new commercial banks, paving way for mergers and acquisitions.
The decision comes in the wake of massive fraud on customers’ savings at Imperial and Dubai Banks, which apparently escaped its supervisory wing.

“The Central Bank of Kenya has, with immediate effect, placed a moratorium on licensing of new commercial banks until further notice,” the regulator said in a brief statement issued to the media.
The regulator will, however, continue approving mergers and acquisitions.  Kenya has one of the highest ratio of banks relative to population in the world.
There are 41 banks – including a mortgage financier – serving about 44 million people, putting the ratio at 0.93 or simply one bank for every 1.07 million people.
Africa’s largest economy Nigeria has a ratio of 0.12 since it has 22 banks for an estimated population of 180 million.  South Africa, the continent’s most advanced economy, has a ratio of 035 with 19 banks for its 55 million population.
The Kenya Deposit Insurance Corporation, the statutory managers for Dubai Bank which was put in receivership on August 14, recommended its liquidation just five days after taking over.  Revival plans for Imperial Bank, placed under statutory management on October 13 are ongoing.
Both cases have widely been seen as “isolated and unique to the two firms” due to weak internal governance controls and not systemic to the entire industry.
CBK governor Dr. Patrick Njoroge has, however, pointed out inadequate capacity of the supervision department to oversee and query the “rapidly changing’ banking IT systems of the 41 leaders.
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