Barclays sounds the alarm on banking overregulation

Barclays Kenya managing director Jeremy Awori. FILE PHOTO | NMG 

Barclays Bank of Kenya #ticker:BBK says it sees banking services possibly becoming more costly in the near future due to increased regulations in the sector.

The lender, with more than 100-years presence in Kenya, says the sector is likely to face more regulations in 2019, complicating operations in the sector even as regulators tighten rules to grow trust in the market.

“Trust is the most important asset for any bank. The Kenyan banking industry finds itself — although well intended — in a potential overregulation cycle,” Barclays said in its latest annual report.

“In 2019, we are likely to see more laws being implemented in banking, likely making operations more complex to manage and banking services more costly.”

Banks have witnessed heightened scrutiny, backed by new regulations under the reign of Central Bank of Kenya (CBK) Governor Patrick Njoroge. This was especially after three banks collapsed in quick succession over governance lapses.


While the lender cites a sound banking sector with stronger balance sheets as a key positive, it warns of increased negative impact on lenders’ revenues, costs and capital positions.

“Additional compliance requirements and charges would ultimately affect customers. Interest rate cap and stricter credit scoring could result in certain customers and segments being excluded from formal financial services,” it cautions.

According to Barclays, some regulations introduced in the recent past have seemed to overlap on intent and requirements.

For instance, it explains, the more than five pieces of new regulations that came last year seemed to complicate the banking environment.

Consumer protection, data privacy and cybersecurity were the broad regulatory themes last year.

Barclays however acknowledges that tighter regulation is crucial to ensure the sector maintains the highest standards so as to predict and prevent financial crimes.

“We welcome the need to make the industry safe and sound. Thus, we support the regulators and will continue to collaborate as the regulatory regime evolves,” BBK says.

The recently released 2019 East Africa CEO outlook report cited the changing regulatory environment as third biggest concern for corner office holders after operational risks and cyber security threats.