CBK proposes new license fee structure for banks
In the first year of implementation, CBK plans to set the rate at 0.6 per cent.
Kenyan Banks will be required to pay their annual licensing fees to the regulator, Central Bank of Kenya (CBK), at a specific rate of their gross annual revenue once the new proposal is made law.
Cited as the Banking (Fees) (Amendment) Regulations, 2025, upon gazettement, shall replace the current model where Banks’ license fees are charged based on the number of branches.
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CBK says the move has been necessitated by the increasing level of oversight which requires significant resources to effectively discharge supervisory mandates.
“In addition, the proposed review is aimed at establishing a licence fee framework aligned with international standards and modern banking dynamics,” CBK said in a notice dated March 2025.
Terming the Gross Annual Revenue (GAR) methodology, the framework is capped at a rate of 1.0 per cent prorated over a period of three years.
GAR includes income from interest on loans, advances, government securities and placements, income on fees and commissions on loans and advances, dividend income, foreign exchange trading income, and any other income.
In the first year of implementation, CBK plans to set the rate at 0.6 per cent.
In the second year, the rate will increase to 0.8 per cent, and by the third year, it will reach the final rate of 1.0 per cent.
The proposed 1.0 per cent rate has been justified based on several key factors. Firstly, it aligns with the rates currently charged by other domestic regulators and international jurisdictions, which range from 0.05 per cent to 1 per cent.
Additionally, CBK says the proposed rate is in line with the size, complexity, risk profile, and interconnectedness of Kenya's banking sector, especially when compared to neighbouring countries.
“The proposed 3-year graduated implementation of the 1.0 per cent rate will moderate the potential adverse and significant impact on profitability and viability of banks,” CBK said.
Nevertheless, the regulator proposes the upward review of licence fees for commercial banks be done progressively over a period of three years to ensure that the banks are able to transition smoothly into the new licensing fee framework.
Notably under the prevailing model, the licence fees for the head office of a commercial bank are pegged at Sh400,000, while licence fees for each branch range between Sh100,000 and Sh150,000 depending on the geographical location of the branch.
In addition, CBK Prudential Guideline, 2013, stipulates annual licence fees for Non-operating holding companies and the bank’s third-party agents at Sh500,000 and Sh1,000, respectively.
Adding on the reasons that fueled the review, the regulator says the consultative paper relates to the Central Bank of Kenya (CBK) proposal to review banking license fees and other charges for commercial banks under the Fourth Schedule of the Banking Act.
It reckons that the current fees were last updated 33 years ago in 1990.
“Since then, significant changes have occurred in Kenya's financial sector, including exponential growth in the size, complexity and risk profile of financial institutions.”
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