The Central Bank of Kenya (CBK) has increased its paid-up capital saying this will enable it to modernize its facilities and infrastructure, strengthen operations and make it more resilient in dealing with shocks in the financial markets.
CBK’s paid-up capital has thus increased to KSh 35 billion from KSh 20 billion.
This transaction happened on September 16, 2019, when the bank transferred to the Government Consolidated Fund KSh 4billion as a distribution from it’s General Reserve Fund (GRF) as at end FY2018/19.
A move to increase the financial muscle of CBK follows a recent statement from National Treasury that it had raised KSh 66 billion out of a target of KSh 78 billion in dividends and retained earnings from state corporations.
CBK says increased financial muscle will also enable it to provide new generation currency in line with the 2010 Constitution. CBK is mandated to issue new generation currency, with an expected cost of KSh15billion.
The monetary authority mentions that while there has been substantial growth of the financial sector, its CBK’s paid-up capital had remained at KSh.5 billion from 2009 to June 2019, when a previously approved increase to KSh20 billion was implemented.
To accommodate increases in paid-up capital, CBK’s authorized capital was increased from KSh.5 billion to KSh.50 billion, with effect from June 26, 2019.
The transfer (loosely known as “remitting of dividends”) was executed by crediting the Ministry of Finance’s Deposit Account at CBK.
Concurrently, CBK increased its paid-up capital from KSh.20billion to KSh.35billion, in accordance with Section8 (3) of the CBK Act and implemented through a transfer of funds from the GRF.
The increased paid-up capital strengthens CBK’s financial position, enabling it to pursue its functions even in times of stress and sustaining its financial independence.
“Specifically, CBK will be better able to absorb losses that may arise from discharge of its functions; provide confidence that it will meet its domestic obligations; and cushion against shocks arising from price and exchange rate movements,” said CBK in a statement.
