New tough rule for banks and insurers in Kenya

NAIROBI: The National Treasury is planning to increase the minimum capitalisation level for commercial banks and insurance companies from Sh1 billion to Sh5 billion.

"The minimum core capital for commercial banks will increase from the current Sh1 billion to Sh5 billion by December 2018. Further, the minimum core capital for insurance doing general business will increase to Sh600 million and Sh400 million for those engaged in life business," National Treasury Cabinet Secretary Henry Rotich announced Thursday.

The National Treasury Thursday said Kenya was in the process of becoming a regional financial hub and will therefore increase the minimum capitalisation levels for these firms in order to achieve the goal.

This move is in line with plans by Treasury to establish an International Financial Centre in Nairobi.

Small and medium-sized banks that will fail to raise this new capital level will be forced to either merge or acquire rivals to meet the requirement.

The Central Bank of Kenya will also be empowered to issue non-renewable licences as well as withdraw licences of any commercial bank at any time to remove repetitive licensing procedures.

In a wide range of tax and miscellaneous measures contained in the Finance Bill 2015-16, Rotich also introduced tax rebates for employers who are willing to employ fresh graduates on internship for a period of 6-12 months.

"This tax incentive will be available to employers who can take in at least 10 graduates," said Rotich.

This year's budget also increased duty on imported sugar to protect the local sugar industry that has been driven to the ground by the entry of cheaper imports.

Duty on imported sugar now goes up from $200 (Sh19,441) to $460 (Sh44,714) per metric tonne, a measure Treasury hopes will cushion local producers from unfair competition.

Rotich also gave tax amnesty to landlords with rental tax arrears.