The Star (Nairobi)

16 August 2014

Kenya: CBK Lines Up Three More Supervisory Colleges

The Central Bank will set up at least three additional supervisory colleges by end of this year as Kenyan lenders dash to establish cross-border operations.

Supervisory colleges are co-ordination structures for banking groups with significant regional presence and bring together regulatory authorities where such banks have operations.

CBK set up the first of such in 2012 for KCB Group which has presence across East Africa and South Sudan. Last year it established two more for Equity Bank and Diamond Trust Bank.

More Kenyan banks are eyeing regional expansion, with 11 already having subsidiaries across the EAC bloc and South Sudan as at December 31, 2013. The 11 banks had 288 branches outside Kenya, most of them in Uganda.

In the latest update, CBK said the number of Kenyan banks branches outside the country stood at 300 as at June 30.

CBK signed Memoranda of Understanding with the Reserve Bank of Malawi, Reserve Bank of Zimbabwe and Bank of Zambia in 2013, setting the stage for additional colleges to further promote cooperation in cross-border banking supervision.

Last year it was negotiating MoUs with the Reserve Bank of India and Democratic Republic of Congo (Banque Centrale du Congo), State Bank of Pakistan and China Banking Regulatory Commission.

"Negotiations for the MoU between CBK and the Reserve Bank of India have been finalised. On the other hand, negotiations between CBK and the Central Bank of Congo, the State Bank of Pakistan and the China Banking Regulatory Commission are still on-going," CBK told the Star via email.

It said the existing supervisory colleges have proved useful to the regional banking sector regulators by enabling them to share experiences.

"Supervisory colleges do not usurp the regulatory powers of any of the supervisors/regulators .... Consolidated supervision enables assessment of the financial health of an entire banking group as members of the group can impact on the stability of the entire group," CBK said.

Consolidated supervision, it said, helps multinational lenders operate smoothly as regulators harmonise their supervisory practices after understanding the banking groups' structures better.

CBK hosted supervisory colleges meetings for KCB, Equity and DTB last October, bringing together regulators from the EAC and South Sudan.

The 288 subsidiaries of Kenyan banks held Sh236.5 billion in gross deposits as at the end of 2013 and made Sh5.2 billion in pre-tax profits. Uganda contributed the lowest profits despite hosting 123 branches, the highest.

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