Bank of Africa (BOA) Kenya has been exempted from a 25 percent shareholding legal provision that caps the ownership of a bank.
“Bank of Africa Kenya has received approval from Cabinet Secretary for the National Treasury and Planning to recognize KSh1.5 billion as Tier 1 capital, thereby bringing the shareholding of the bank’s parent company, BOA Group SA, above the statutory threshold of 25 percent for a non-regulated entity,” BOA Kenya said in a statement on Friday.
The funds have been held by the bank as a customer deposit since March 2020, as BOA Group sought the exemption of the Cabinet Secretary for the increase of its shareholding in the bank.
In a Special Gazette notice, National Treasury Cabinet Secretary Ukur Yatani said “In exercise of the powers conferred by Section 53(1) of the Banking Act, the Cabinet Secretary for the National Treasury and Planning exempts the Bank of Africa Kenya from the provisions of section 13 (1) of the Banking Act for a period not exceeding five years.”
BOA is in breach of at least two capital adequacy ratios, which means its financial health is not good.
Section 13 (1) of the Banking Act (Restrictions on ownership of share capital of an institution) states that:
(1) No person other than—
(a) another institution;
(b) the Government of Kenya or the Government of a foreign sovereign State;
(c) a State corporation within the meaning of the State Corporations Act (Cap. 446); or
(d) a foreign company which is licensed to carry on the business of an institution in its country of incorporation, shall hold, directly or indirectly, or otherwise have a beneficial interest in, more than twenty-five percent of the share capital of any institution.
BOA Kenya is a subsidiary of Bank of Africa Group — part of BMCE Bank of Africa Group — which has operations in 20 African countries and 30 others worldwide.
BOA initiated a clean-up exercise in 2019 to provide for its non-performing portfolio which eroded its capital adequacy ratios, and as a show of confidence in its subsidiary, BOA Group injected an additional $15 million (KSh1.5 billion) in tier 1 capital and $7.5 million (KSh750 million) in tier 2 capital.
In its annual report for 2019, the bank agreed that its capital adequacy ratios were inadequate to meet the regulatory minimum ratios.
The first tranche was disbursed by March 2020 while the second one, a subordinated debt, is to be disbursed by December 31, 2020.