Senators demand Treasury explanation on bank capital minimums

Senators are demanding an explanation from the National Treasury on why the minimum capital requirement for banks has been increased to Sh5 billion from Sh1 billion.

Senate Minority Leader Moses Wetang’ula (Bungoma), and senators Boni Khalwale (Kakamega) and Mutula Kilonzo Jnr (Makueni) took issue with Cabinet Secretary Henry Rotich’s policy, saying it violates provisions of the law against monopolies.

Mr Wetang’ula, who is also a CORD co-principal, last week sought a statement through the committee on Finance on what informed Mr Rotich’s decision on the policy.

He wants Rotich to revoke the announcement, which he termed “misguided, unpatriotic and oppressive”.

Wetang’ula also wants Rotich’s decision interrogated, saying if it is implemented, it would disadvantage small players in the banking sector.

“Is Rotich aware that this myopic statement serves to bolster and perfect the dominance of foreign and established locals’ capital, and curtails or effectively kills competition and emergence of new players in the banking sector?” he asked during debate in the House.

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“The CS should vacate this policy to allow the banking sector to develop with the dynamism of a free market economy that Kenyans embrace.”

Wetang’ula, who is a member of the Finance committee, wants Rotich to report if the policy was subjected to private sector and public participation.

“Is Rotich aware that small and emerging financing institutions and banks are established to serve specific niche markets and specific interests compared to the major established banks? Some of these banks are out of the reach of entrepreneurs, especially women and youth, and, therefore, this plan might lock them out.”

In his speech last month, the CS said the minimum capital requirement would be increased progressively to Sh5 billion by December 2018.

Mr Kilonzo termed this increase “misconceived” and asked for a list of banks’ share capital to determine if the policy is trying to “swallow small banks or give control to the big boys”.

Deputy Speaker Kembi Gitura (Murang’a) directed the finance committee to look into the matter. The team’s chairman, Senator Billow Kerrow (Mandera), said he would table a response within two weeks.

Central Bank of Kenya Governor Patrick Njoroge questioned the rationale of the policy during his vetting, saying it would result in mergers and closure of banks, and promised to question the matter once he takes office.