The Central Bank of Kenya (CBK) has revised its fines policy in the recently released Draft Banking (Penalties) Regulations 2024, transitioning from generic fines for all infractions to specific fines targeting financial institutions and their officials who contravene regulations.
Under the updated guidelines, financial institutions may incur fines of up to KES 20 million for breaches concerning minimum capital requirements, adequacy ratios, loan provisions, and corporate governance standards.
Moreover, institutions failing to maintain accurate records or comply with CBK audit requests could face similar penalties.
Penalties for other violations range from KES 2 million to KES 10 million for institutions. This regulatory overhaul marks the first revision since 2017 when a uniform maximum fine of KES 20 million was enforced, regardless of the nature of the violation.
The maximum penalty for individuals violating the Banking Act remains unchanged at KES 1 million. Violations with potential fines of up to KES 10 million include actions by institutional shareholders who fail to reduce their stake below five percent in a bank following CBK’s determination that they no longer meet the criteria for significant shareholders.
Additionally, shareholders persisting in exercising their voting rights despite failing the CBK assessment may face fines of up to KES 10 million.
Moreover, shareholders transferring more than five percent ownership in a bank without CBK approval could incur fines of up to KES 8 million, as well as those breaching the 25.0% cap on beneficial ownership in a bank.
CBK also imposes fines of up to KES 5 million for offenses such as unauthorized director appointments and improper display of audited financial results in branches.
In the fiscal year ending June 2023, CBK collected KES 66 million in fines and penalties from banks and forex bureaus.
These heightened surveillance measures and stricter penalties underscore CBK’s commitment to stabilizing the sector following the bank collapses in 2016 and combating financial crimes.
