The Central Bank of Kenya has flagged 35 commercial banks for breaching banking laws and prudential rules, marking a sharp increase from the 11 lenders cited a year earlier.
The findings are contained in CBK’s 2025 Bank Supervision Annual Report, released in September 2026. The number of banks found in breach was more than three times the 2024 figure, an increase of about 218 per cent.
The violations covered areas including loan concentration, capital requirements, foreign-exchange exposure, liquidity and corporate governance.
Lending rules account for many of the breaches
Risk-based credit pricing was a major area of concern.
CBK said it carried out targeted inspections in 2025 to assess how commercial banks were applying its Risk-Based Credit Pricing Model, which was introduced in 2019.
The inspections resulted in penalties against 33 banks, while two others faced administrative action. Only three banks were found to be fully compliant with the model.
The regulator also found that 10 banks had breached the 25 per cent single-obligor lending limit. The rule is designed to prevent banks from becoming too heavily exposed to one borrower.
Two banks exceeded the limit on lending to a single insider, while another breached the overall limit on insider lending.
CBK also found breaches involving investments in land and buildings and excessive exposure to large borrowers.
Capital and governance weaknesses emerge
Capital requirements were another area of concern.
Seven banks failed to maintain the minimum core capital of KSh3 billion. Five fell below the 14.5 per cent total capital-to-risk-weighted-assets requirement, while four did not meet the 10.5 per cent core capital ratio.
Three banks also fell below the required 8 per cent core capital-to-deposits ratio. Two exceeded the permitted foreign-exchange exposure, while one failed to maintain the statutory 20 per cent liquidity ratio.
Corporate governance rules were also breached.
Three banks exceeded the 25 per cent limit on ownership by a single shareholder. Three others failed to meet board composition requirements, while one institution transferred more than 5 per cent of its shares without prior CBK approval.
CBK said remedial measures were taken against the institutions involved.
Banking sector remains financially strong overall
Despite the regulatory breaches, CBK said the banking sector remained financially sound overall in 2025.
The sector’s total capital adequacy ratio stood at 20.7 per cent at the end of the year, well above the 14.5 per cent minimum. Average liquidity was 59.3 per cent, compared with the statutory minimum of 20 per cent.
Banks also recorded higher profits. Profit before tax rose by KSh46 billion, or 17.7 per cent, to KSh306.3 billion in 2025 from KSh260.3 billion the previous year.
Customer deposits increased by 11.6 per cent to KSh6.12 trillion, while total net assets grew by 10.3 per cent to KSh8.35 trillion.
The figures therefore present a mixed picture: individual institutions faced a wide range of regulatory shortcomings, while the banking industry as a whole ended 2025 with stronger capital, liquidity and profitability positions.
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