The Central Bank of Kenya nominee Dr Kamau Thugge said he intends to consolidate the banking sector to fewer stable players to reduce the risk of weak banks collapsing while strengthening the merged units to be able to compete more effectively.
When Dr Thugge was Principal Secretary for the National Treasury under CS Henry Rotich, they co-authored a Bill that sought to bring consolidation in the industry through raising minimum capital from the current Kes1 billion to Kes5 billion.
The move to raise bank capital requirements could have forced mergers and acquisitions as smaller banks sought partners to survive but Members of Parliament rejected the strategy saying raising barriers to entry will make banking too elitist.
As at December last year, Kenya had 38 commercial banks, one mortgage finance company, one mortgage refinance company, 10 representative offices of foreign banks, and at least 14 microfinance banks (MFBs).
Although the exiting Governor, Dr Patrick Njoroge, was against increasing core capital to force consolidations in what he felt would lead to forced marriages, but following the collapse of three lenders, he softened up and facilitated several acquisitions of weak lenders including Jamii Bora, Mayfair, Transnational and Spire Bank.