Treasury proposes extension of Sh10 billion bank capital rule, defying earlier CBK position

Treasury proposes extension of Sh10 billion bank capital rule, defying earlier CBK position
Treasury proposes extension of Sh10 billion bank capital rule, defying earlier CBK position - Treasury Cabinet Secretary John Mbadi appearing before the National Assembly Committee on Delegated Legislation at Bunge Towers, Nairobi, on March 12, 2026. (Photo: X/Treasury)
Treasury Cabinet Secretary John Mbadi appearing before the National Assembly Committee on Delegated Legislation at Bunge Towers, Nairobi, on March 12, 2026. (Photo: X/Treasury)

The move seeks to amend provisions of the Business Laws (Amendment) Act, 2024, which introduced a phased increase in minimum core capital requirements for lenders.

Commercial banks could get a three-year reprieve to meet the Sh10 billion core capital requirement after the National Treasury proposed extending the compliance deadline from December 2029 to December 2032.
Treasury Cabinet Secretary John Mbadi announced the proposal during the 2026/27 Budget reading, signalling a major shift in the implementation timeline for capital reforms in the banking sector.
The move seeks to amend provisions of the Business Laws (Amendment) Act, 2024, which introduced a phased increase in minimum core capital requirements for lenders.

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“I will be proposing an amendment to the timeline specified in the Business Laws Amendment Act of 2004 to allow commercial banks to raise the minimum core capital to Sh10 billion by December 31, 2032, without their new annual milestone,” Mbadi said.
The revised proposal would eliminate the annual capital milestones and instead allow banks a longer, more flexible window to comply with the final Sh10 billion threshold.
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It would mark a departure from the current framework, which requires lenders to progressively raise core capital from Sh1 billion to Sh3 billion by the end of 2025, Sh5 billion in 2026, Sh7 billion in 2027, Sh8 billion in 2028 and ultimately Sh10 billion by 2029.

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The proposal comes against the backdrop of pressure already building within the sector, with several banks scrambling to raise fresh capital through shareholder injections, mergers, or strategic partnerships after the Central Bank of Kenya (CBK) declined to extend the original compliance deadlines.
CBK had maintained a firm stance that the banking industry must adhere to the existing timeline under the 2024 amendments, warning that the capital requirements were essential for strengthening the sector’s resilience and stability.
The regulator’s position effectively set the stage for intensified capital-raising efforts among smaller lenders facing profitability and investor-raising constraints.
However, Mbadi said the extended timeline is intended to ease pressure on financial institutions and support more strategic capital planning.
“This will provide the flexibility necessary for institutions to pursue measured, commercially sound and market-sensitive capital raising strategies in a manner that preserves shareholder value and sustains investor confidence,” Mbadi said.

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