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{
    "id": 570858,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/570858/?format=api",
    "text_counter": 15,
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    "content": "international investments and participate in the financial services arena. Therefore, Kenya needs to have a strong and well capitalized banking sector which will be able to stand any shocks or financial crisis. Therefore, it is necessary to capitalize the banking sector. The third point is that the monetary affairs committees of the regional Central Bank Governors passed a resolution requiring all regional state Central Banks to also increase their core capital to 10 per cent of the monetary liabilities. In fact, this is in line with the Central Bank of Kenya (CBK) requirement to increase its paid up capital from Kshs5 billion to Kshs20 billion as provided for in the CBK Bill, 2015 which under Clause 26 states clearly that the authorized capital shall be fully subscribed and paid up. Those are the reasons that informed the policy announcement by Treasury. Mr. Speaker, Sir, the second question was whether the policy statement was subjected to public and sector participation. According to the Cabinet Secretary, this was supposed to have been undertaken when the Budget hearings were being done. The Budget Statement is a culmination of the Budget-making process which includes public participation but I am not convinced that there is an actual involvement of the banking sector in that participation. The Government believes that through the Budget process, they have subjected it to public participation. The third question is when the policy is expected to be effective, that is, when do we expect to raise the minimum share capital of the banks to Kshs5 billion. This is by December, 2018; Kshs2 billion by 31st December, 2016; Kshs3.5 billion by 31st December, 2017 and Kshs5 billion to be attained by 31st December, 2018. The fourth question was whether the Cabinet Secretary, National Treasury is aware that this policy announcement serves to bolster and perfect the dominance of foreign and established local banks. This will effectively kill competition and emergence of new local players in the banking sector. Mr. Speaker, Sir, as of March 2015, the Kenyan banks were capitalized as follows: There was only one bank which had a capital below Kshs1 billion; about 15 banks had a capital of above Kshs1 billion but below Kshs2 billion; seven banks had core capital between Kshs2 billion and Kshs5 billion; 21 banks have core capital of above Kshs5 billion. Out of the 44 banks, nearly a half of them have core capital above Kshs5 billion. Therefore, it is clear from this argument that dominance is not likely to arise because for a cartel to exist, you need to have about five or six banks. This is a situation where already over 21 banks have a capital above that. Furthermore, Section 24 of the Competition Act, 2010 prohibits any conduct which amounts to abuse of dominant position. What the law prohibits in the Competition Act is the abuse of that dominant position; otherwise dominance in a market is not an illegality in itself. Mr. Speaker, Sir, the Act also provides for merger regulations. The intention of all this is to encourage banks to merge so that they can be stronger. Therefore, merging is not anti-competitive in nature. The other issue is whether the Cabinet Secretary is aware that smaller and emerging financial institutions and banks established to serve niche markets and special interests compared to the major established banks, some of which are out of reach for The electronic version of the Senate Hansard Report is for information purposes only. A certified version of this Report can be obtained from the Hansard Editor, Senate."
}