The Central Bank of Kenya/FILE
Banks that earn higher revenues are set to start paying higher license fees should a new proposal by the Central Bank of Kenya be made into law.
In an amendment to the Banking (Fees) Regulations of 2025, the CBK is looking to peg banking fees on a bank's gross annual revenue.
This will include income from loans, government securities, fees, commissions, foreign exchange trading, and dividends.
This CBK’s push for a revenue-based approach in bank regulation will be a shift from fixed rates to a model based on gross annual revenue.
The computation of banking license fees is currently based on the number of branches to determine the applicable annual licence fees for each commercial bank.
Under the branch-based methodology, the more branches a bank has, the higher the license fees. If implemented, the new regulations would repeal Legal Notice No. 188/1994 on Banking Fees (Amendment) Regulations, 1994, replacing it with the Banking Fees Regulations of 2025.
Under the new proposals, Banks must settle the fees before a they are granted a licence and will be payable on an annual basis, no later than 15 days after the publication of audited financial statements.
"The Kenyan banking sector has grown significantly over the past 30 years. Total assets have increased by more than 38 times—from Sh202 billion in 1994 to Sh7.6 trillion in 2024," said CBK in its consultative paper review.
The Apex bank says that despite this growth, the licence fees for commercial banks have remained unchanged.
Since the proposals indicate that banking licence fees will be based on a bank’s gross annual revenue, larger banks with higher earnings may have to pay more to maintain their licences.
Currently, commercial banks pay a license fee of Sh400,000 for their head office, while branch license fees range between Sh100,000 and Sh150,000, depending on location.
Additionally, under the CBK Prudential Guideline, 2013, Non-Operating Holding Companies are required to pay an annual fee of Sh500,000, while third-party agents pay Sh1,000.
CBK attributes the need for a review to the growing regulatory and supervisory challenges driven by the expansion of Kenyan banks into the regional market.
The rise of banking groups and the increasing complexity of cross-border supervision have further necessitated a revision of licensing fees to support effective oversight.
Central Bank governor Kamau Thugge notes that the rise of banking groups and the increasing complexity of cross-border supervision have further necessitated a revision of licensing fees to support effective oversight.
“A review and analysis of licence fees charged by selected regional and international regulators indicate that Kenya’s license fees are lower. In East Africa, Kenya’s licence fees are the least compared to Uganda, Rwanda, and Tanzania,” Thugge said in the paper.
CBK is proposing a phased increase in the licensing fees for commercial banks over the next three years, starting with a 0.6 per cent rate in the first year, 0.8 per cent in the second year, and reaching 1.0 per cent in the third year.
According to Thugge, the justification for the 1.0 percent rate is based on multiple factors, including its alignment with licensing fees charged by other domestic and international regulators, which range between 0.05 percent and 1.0 percent.
Additionally, the rate takes into account the size, complexity, and interconnectedness of Kenya’s banking sector in comparison to neighboring countries.
CBK maintained that that the gradual implementation of the 1.0 percent fee is intended to mitigate any significant impact on banks' profitability and overall financial viability.
By spreading the increase over three years, the regulator aims to ensure a smooth transition for banks adapting to the new framework.
The proposal is part of CBK’s broader efforts to enhance the stability and regulatory compliance of the country’s banking sector.
