Embolden NCBA now wants Central Bank of Kenya to facilitate more takeovers by raising minimum capital requirements

NCBA. (the star)
  • NCBA Group Plc Chief Executive Officer John Gachora reckons raising minimum capital requirements will “force marriages” between lenders too afraid 
  • The Central Bank and Kenyan lawmakers have been hesitant to to boost the amount of capital lenders need to set aside for potential shocks since 2015.
  • NCBA Group became Kenya’s third-largest bank following the combination of Commercial Bank of Africa Ltd. and NIC Group Plc.

A Kenyan lender associated with President Uhuru Kenyatta wants the Central Bank of Kenya to do more to facilitate more takeovers in East Africa’s biggest economy.

NCBA Group plc, which came into being last year after Commercial Bank of Africa merged with NIC Bank is urging the central bank to increase safety buffers to drive more takeovers in East Africa’s biggest economy.

NCBA Group Plc Chief Executive Officer John Gachora reckons raising minimum capital requirements as much as tenfold to 10 billion shillings ($99 million) will “force marriages” between lenders too afraid of the risks that come with mergers and acquisitions.

“It starts to force real sizable banks that can compete both on scale, coverage, reach, as well as pricing,” he said in an interview with Bloomberg in the capital, Nairobi.

With over 40 commercial banks servicing 47 million people, Gachora says there should be no more than 15 institutions, including specialized banks.

“It’s hard to get the banks to play their rightful role if every day all you’re doing is competing on the margins.” he said.

NCBA Group became Kenya’s third-largest bank following the combination of Commercial Bank of Africa Ltd. and NIC Group Plc, setting off at least three other deals in the industry.

President Uhuru Kenyatta; his brother Muhoho and former First Lady Mama Ngina Kenyatta together directly hold stakes worth a combined Sh8.5 billion in NCBA which translates to about 13.2 percent of the bank.

The central bank and Kenyan lawmakers have resisted efforts from the National Treasury to boost the amount of capital lenders need to set aside for potential shocks since 2015, fearing the rules may squeeze smaller banks and slow lending.

However, even increasing core capital levels to 5 billion shillings won’t be enough to strengthen the industry, said Gachora, who is also vice chairman of the banking lobby group.

The country’s nine biggest banks account for 85% of the sector’s profit before tax, according to central bank data.

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