The Central Bank of Kenya (CBK) has proposed an overhaul of commercial banking license fees, marking the first review in 33 years.
Under the proposed Banking Regulations 2025, the CBK intends to shift to a Gross Annual Revenue (GAR) model, where license fees will be determined based on the gross annual revenue of an institution.
The revenue will be determined using the audited financial statement from the previous financial year, including income from interest, fees, commissions, and trading. Currently, licensing fees are based on a branch-based method, where banks pay fees depending on the number of branches they operate.
According to the apex bank, the transition to the GAR model will be gradual, starting at 0.6% in 2025, increasing to 0.8% in 2026 and 1% in 2027. Banks will be required to pay the fees before receiving a licence and annually within 15 days after publishing their audited financial statements. CBK projects that this will generate KSh 4.5 billion in the first year, rising to KSh 7.5 billion by the third year.
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The GAR model is expected to reduce profitability by 1.8% to 3.1% over the three-year period, compared to 16.2% to 27% on the asset based method and 11.6% to 19.4% for the deposit based model.
To simplify the licensing process, the CBK has also proposed to abolish other application fees, consolidating all charges into the GAR-based licence fee.
