CBK to Gain More Powers Under New Banking Penalties Regulations

Kenya’s banking industry could soon face tougher scrutiny as the government seeks to give the Central Bank of Kenya (CBK) broader powers to punish financial institutions that break the law.

This follows the presentation of the Banking (Penalties) Regulations, 2025, to Parliament by Treasury Cabinet Secretary John Mbadi, a move that signals the government’s renewed commitment to restoring discipline and transparency in the financial sector.

The proposed regulations, now being reviewed by the Parliamentary Committee on Delegated Legislation, aim to strengthen CBK’s authority by allowing it to impose harsher penalties on banks and individuals who violate the Banking Act or ignore prudential guidelines.

The Treasury announced the new measures through an X post on Thursday, November 13, 2025, describing them as essential to making Kenya’s banking system more accountable and aligned with global financial standards.

“The Banking (Penalties) Regulations, 2025, strengthen the compliance framework within the financial sector by empowering the Central Bank of Kenya (CBK) to impose stiffer penalties for violations of the Banking Act and related guidelines,” the Treasury said in the post.

The new framework is modelled on the Basel Core Principles international standards that promote strong, transparent, and stable banking systems. The Treasury noted that the regulations will make penalties “effective, proportionate, and dissuasive,” ensuring that non-compliance becomes too costly for banks to risk.

If approved, the CBK will have the power to fine financial institutions up to KSh20 million for violations and up to KSh1 million for individual offenders. In addition, higher daily penalties will be introduced for institutions that delay payment of fines, a change meant to prevent them from dragging their feet once penalised.

The regulations will also establish a structured appeals mechanism for those penalised, ensuring fairness while maintaining the CBK’s oversight strength.

Offences that can attract penalties include failure to provide accurate customer details, involvement in unethical or fraudulent practices, and breaches of the Banking Act or its accompanying guidelines.

The tightening of banking rules comes at a time when regulators have been calling for a stronger compliance culture within the sector. In 2024, the CBK fined 11 commercial banks over Ksh 5 million each after discovering they had breached insider lending rules.

The banks were found to have extended excessive loans to their directors and staff, compromising depositor safety and violating governance principles.

Such cases exposed the weaknesses of the existing penalty system, where fines were seen as insufficient deterrents. The proposed Banking (Penalties) Regulations, 2025, therefore, seek to close that gap by giving CBK more authority to enforce compliance and by introducing tougher consequences for offenders.

Treasury CS John Mbadi, while tabling the regulations, also presented two other key legislative proposals: amendments to the Sports, Arts and Social Development Fund and the establishment of the Government Press Fund.

The Sports, Arts and Social Development Fund (Amendment) Regulations, 2025, are designed to streamline the management of the fund by focusing its mandate strictly on supporting sports and the arts.

Health-related programs, which were previously funded through the same mechanism, will now fall under the newly created Social Health Authority. The Treasury said this adjustment will enhance accountability and ensure the fund remains dedicated to promoting talent and creativity.

Meanwhile, the Government Press Fund Regulations, 2025, aim to breathe new life into Kenya’s oldest state institution — the Government Press, founded in 1895.

The regulations propose creating a dedicated fund to modernise its operations, sustain production of key documents such as the Kenya Gazette, and invest in modern printing technology to improve efficiency and reduce delays.

According to the Treasury, all three sets of regulations on banking penalties, the sports fund, and the Government Press have gone through public participation and meet the requirements of the Statutory Instruments Act, 2013.

This ensures that they reflect stakeholder input and uphold the government’s broader agenda of transparency and accountability.

Parliament will now deliberate on the proposals before they can take effect. If approved, the Banking (Penalties) Regulations, 2025, will mark a turning point in Kenya’s financial governance by empowering the CBK to act decisively against misconduct and reinforcing public trust in the country’s banking system.