Kenya freezes licensing of new commercial banks

The Central Bank of Kenya (CBK) said Wednesday it has suspended the licensing of new commercial banks until further notice.

A statement from the country's apex bank said the move which takes effect immediately does not apply to cases relating to resolution, amalgamation and acquisition of banks.

"The Central bank of Kenya has with immediate effect placed a moratorium on the licensing of new commercial banks until further notice," CBK Governor Patrick Njoroge said in a statement issued in Nairobi.

The drastic move came two months after the closure of the 28-branch-strong Imperial Bank over banking malpractices.

The banking regulator has warned that strict measures would be in place to prevent similar incidents, including clients' deposits being unilaterally used for other non-core banking activities leading to losses.

On Tuesday, CBK said although the banking sector is liquid and well capitalized, credit and liquidity risks, largely from market segmentation, remain.

Njoroge said the CBK is closely monitoring the sector and continues to address and support financial stability.

In particular, he noted the recent reduction in short-term interest rates and expects them to be transmitted to commercial lending rates. Endit