Consolidated Bank of Kenya and Credit Bank loans to directors and employees have exceeded their core capital, resulting in breach of insider lending rules and possible regulatory actions.
State-owned Consolidated Bank had lent its employees Sh436.7 million as at March 2026 despite having a negative core capital of Sh541.1 million. Loans to the bank employees grew by 6.3 percent from a year earlier despite being in breach of the regulatory requirement.
Credit Bank, associated with the family of the late politician Simeon Nyachae, had insider loans of Sh1.37 billion against a core capital of Sh1.36 billion as at March 2026.
The Central Bank of Kenya (CBK) mandates lending to directors and employees not to exceed a bank’s core capital in order to prevent conflict of interest and overexposure to insiders. Core capital refers to shareholders’ direct investment in a bank.
“Directors, chief executive officers and management should not use their positions to further their personal interests,” reads CBK’s prudential guidelines
“An institution shall not in Kenya therefore grant or permit to be outstanding advances or credit facilities or give any financial guarantee or incur any other liabilities to or in favour of, or on behalf of, its associates and the persons mentioned amounting in the aggregate to more than one hundred per cent of the core capital of the institution,” added the regulator.
Banks that breach the regulation face penalties of Sh5 million but the penalty can rise up to Sh20 million depending on severity.
The two lenders are among four lenders operating below the regulatory minimum core capital requirement of Sh3 billion.
Consolidated Bank, which was cited by the Auditor General for its capital inadequacy is awaiting a Sh1.25 billion cash injection from the government in the financial year that begins in July.
Credit Bank has also disclosed it is in the process of raising additional capital that will not only see it comply with the current requirement of Sh3 billion with the Sh5 billion minimum core capital is set to take effect at the end of this year.
Under the Business Laws (Amendment) Act 2024, banks were required to increase the minimum core capital in the banking sector to Sh3 billion from Sh1 billion by the end of December 2025.
The law requires banks to boost their minimum core capital further to Sh5 billion by the close of 2026, Sh6 billion by the end of 2027, Sh8 billion in 2028 and Sh10 billion by the close of 2029, pointing to the fundraising roadmap facing banks such as Consolidated Bank and Credit Bank.
The Auditor General Nancy Gathungu had flagged Consolidated Bank for the breach of insider lending rules in the review of its financials for the year ended December 2025.
“Review of the Bank’s insider lending position revealed that, as at December 31, 2025, loans advanced to the staff amounted to Sh434,996,000 against a negative core capital balance of Sh546,073,000,” Ms Gathungu says in a report dated March 30, 2026.
