So do we have such banks in Kenya? The answer is yes:
- KCB: At close of play in September 2009, KCB had a balance sheet of Ksh189bn, which si roughly speaking 27% of Kenya's total budget. It also has around 200 branches, 150 of those in Kenya. Thus its a large employer as well. Its collapse won't be pretty. Remedy: At 13%, its tier 1 capital ratio looks strong for versus some Western banks, but its target should be 20% or more given its host economy.
- Equity: Holds just under 50% of Kenya's banking account population irrespective of the size of their accounts. And has 155 branches (130 of them in Kenya). Its collapse would lead to a severe dislocation SMEs and agriculture for which it serves a significant portion. I see its risk coming from liquidity rather than capital concerns. Remedy: Should be required to hold at least 12% of its assets in form of t-bills and or AAA-rated gilts.
- BBK: At Ksh170bn (June 2009), its also a behemoth in the local economy. Included here because of its corporate client content which would again cripple our economy were it or the parent to collapse. Remedy: As with KCB, probably more suspect to lower capital thresholds and should thus be required to hold at least 15% tier 1 capital ratio at all times.
- Co-op: The banker of co-operative societies and Saccos country-wide. And like Equity, therefore, carries systemic risk for the economy. Has a history of appalling size of bad loans coupled with political inteference. Remedy: Higher liquidity and capital requirements. The broker licence was probably a mistake.
2 comments:
Liquidity can be an issue for any bank of any size... matters little... A bank with 50% liquidity can be 'wiped out' if there is a run on the bank.
There needs to be thorough evaluation of most loans in the Kenyan banking system. And then take the necessary writedowns asap.
I fear the NPLs (esp the Provisioning) is inadequate in many banks.
Equity is a different challenge... unlike other 'traditional' bank... how do you assess level of risk in Equity's portfolio?
I am NOT saying EB has understated its NPLs but I am not sure of the methodology they use.
CT- I don't you think you read my post.
Thanks for the comments though
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