Kenya’s banking sector recorded a sharp deterioration in regulatory compliance in 2025, with 35 commercial banks found to have breached the Banking Act and Central Bank of Kenya (CBK) prudential guidelines, up from 11 a year earlier.
The violations cut across lending, capital, liquidity, foreign-exchange exposure and corporate governance, raising fresh concerns over the ability of some lenders to meet basic prudential requirements even as the industry remained profitable and well capitalised overall.
CBK said 10 banks breached the 25 percent single-obligor lending limit, exposing lenders to excessive concentration in individual borrowers. Two banks also exceeded the 20 percent limit on lending to a single insider, while another breached the 100 percent aggregate limit on insider lending.
“Two banks had invested more than 20 per cent of their core capital in land and buildings, while three exceeded the rule limiting aggregate credit facilities to large exposures to five times core capital,” CBK said in its annual banking sector supervision report.
Capital weaknesses were also widespread. Seven banks failed to maintain the minimum Sh3 billion core capital requirement, while five fell below the 14.5 percent total capital-to-risk-weighted-assets ratio.
Four failed to meet the 10.5 percent core capital ratio and three breached the eight percent core capital-to-deposits requirement.
Two banks also exceeded the 10 percent foreign-exchange exposure limit, while one failed to maintain the statutory 20 percent liquidity ratio.
Corporate governance failures added to the regulatory concerns. Three banks breached the 25 percent single-shareholder ownership ceiling, while three failed to meet board-composition requirements. Another institution transferred more than five percent of its shareholding without obtaining prior CBK approval.
The sharpest enforcement action came over risk-based credit pricing, an area central to CBK’s efforts to make bank lending more transparent and responsive to risk. Inspections resulted in penalties against 33 banks, administrative action against two, while only three banks were fully compliant with the pricing model.
The breaches contrast with the sector’s strong aggregate financial position. CBK said the industry’s total capital adequacy ratio stood at 20.7 percent at December 2025, above the 14.5 percent minimum, while average liquidity was 59.3 percent against the 20 percent statutory threshold.
CBK said remedial action was taken against institutions found in breach.
