The Central Bank of Kenya has suspended licensing of new commercial banks to pave 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. Family bank is also under investigations following an alleged fraudulent transfer of Sh791 million was first transferred to a Family Bank account from the NYS kitty.
Mr Tobiko also put Imperial Bank under investigation to determine whether it complied with laws relating to money laundering and proceeds of crime while Family bank is also on investigation. “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.
See also: How imperial bank was brought down
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Kenya arguably has one of the highest ratio of banks relative to population in the world with 41 banks including a mortgage financier – serving about 44 million people. The ratio therefore stands at ratio 0.93 putting 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 0.35 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 Patrick Njoroge has, however, pointed out inadequate capacity of its supervision department to oversee and query the “rapidly changing” banking IT systems of the 41 lenders.
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Next read: Family Bank used in ‘stealing’ NSY funds
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