Kenya’s Capital Markets Authority has proposed raising minimum capital requirements for market intermediaries such as investment banks, fund managers, brokers and dealers in a bid to promote financial stability in the sector.
Under the draft regulations, investment banks would need to maintain liquid capital of at least 50 million Kenyan shillings ($374,000) or 8% of their total liabilities, whichever is higher. The current minimum is 30 million shillings ($224,000).
Fund managers’ minimum liquid capital would double to 10 million shillings ($75,000) from 5 million shillings.
Broker-dealers, dealers, online forex brokers and some other intermediaries that were previously exempt would face new capital floors. Broker-dealers must hold at least 50 million shillings, dealers at least 10 million shillings, and online forex brokers at least 30 million shillings.
Trustees, custodians, money managers, real estate investment trust managers and REIT trustees, who previously had no minimums, would each need liquid capital of at least 5 million shillings ($37,400).
Liquid capital refers to cash and assets exceeding total priority liabilities, providing a buffer if intermediaries go bankrupt or are liquidated.
The authority said the changes aim to improve transparency, investor protection and systemic risk management as Kenya develops its financial markets. Public comments on the proposals are being accepted.
The real estate sector could be significantly impacted as market intermediaries facilitate investment and capital flows. Requiring them to be better capitalized may boost investor confidence and sustainable growth.
