The Central Bank of Kenya (CBK) has slapped UBA Kenya with a fine for breaching capital requirements, citing the lender's failure to meet the minimum core capital-to-deposit ratio. This comes as a blow to the bank, which has been struggling to recover from continued losses.

According to the CBK, UBA Kenya's core capital-to-deposit ratio fell sharply from 29.46% in 2022 to 7.92% in 2023, despite narrowing its losses. The bank reported a pre-tax loss of $2.6 million (KES344 million), down from $3.3 million (KES437 million) in the previous year.

UBA Kenya is not alone in its struggles, as 11 other commercial banks in Kenya were also fined by the CBK for various regulatory breaches. Housing Finance, a mortgage finance bank, and Development Bank of Kenya, a state-owned lender, were among the banks that failed to meet the capital requirements.

The CBK requires lenders to maintain a 10.5% floor for the core capital to risk-weighted assets ratio, 14.5% total capital to risk-weighted assets, and 8% for the core capital to deposits ratio. The regulator plans to increase the minimum capital requirement for commercial banks tenfold to $77.8 million (KES10 billion) to boost resilience to potential financial risks like increased cyber fraud threats and economic shocks.

This development raises concerns over the financial stability of Kenya's banking sector, particularly among smaller banks that may struggle to meet the increased capital requirements. The move is seen as a bid to strengthen the sector and protect depositors' funds, but it may also lead to consolidation in the industry.