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List of Tier 1 Banks in Kenya. A bank’s Capital consists of tier 1 capital and tier 2 capital, and these two primary types of capital reserves are qualitatively different in several respects (there was formerly a third type, conveniently called tier 3 capital).
- Tier 1 capital is a bank’s core capital and includes disclosed reserves—that appears on the bank’s financial statements—and equity capital. This money is the funds a bank uses to function on a regular basis and forms the basis of a financial institution’s strength.
- Tier 2 capital is a bank’s supplementary capital. Undisclosed reserves, subordinated term debts, hybrid financial products, and other items make up these funds.4
A bank’s total capital is calculated by adding its tier 1 and tier 2 capital together. Regulators use the capital ratio to determine and rank a bank’s capital adequacy.
Tier 1 Capital
Tier 1 capital consists of shareholders’ equity and retained earnings—disclosed on their financial statements—and is a primary indicator to measure a bank’s financial health. These funds come into play when a bank must absorb losses without ceasing business operations. Tier 1 capital is the primary funding source of the bank. Typically, it holds nearly all of the bank’s accumulated funds. These funds are generated specifically to support banks when losses are absorbed so that regular business functions do not have to be shut down.
Under Basel III, the minimum tier 1 capital ratio is 10.5%, which is calculated by dividing the bank’s tier 1 capital by its total risk-weighted assets (RWA).42 RWA measures a bank’s exposure to credit risk from the loans it underwrites.
For example, assume a financial institution has US$200 billion in total tier 1 assets. They have a risk-weighted asset value of $1.2 trillion. To calculate the capital ratio, they divide $200 billion by $1.2 trillion in risk for a capital ratio of 16.66%, well above the Basel III requirements.
Also, there are further requirements on sources of the tier 1 funds to ensure they are available when the bank needs to use them.
Tier 2 Capital
Tier 2 capital includes undisclosed funds that do not appear on a bank’s financial statements, revaluation reserves, hybrid capital instruments, subordinated term debt—also known as junior debt securities—and general loan-loss, or uncollected, reserves. Revalued reserves is an accounting method that recalculates the current value of a holding that is higher than what it was originally recorded as such as with real estate. Hybrid capital instruments are securities such as convertible bonds that have both equity and debt qualities.
Tier 2 capital is supplementary capital because it is less reliable than tier 1 capital. It is more difficult to accurately measure due to its composition of assets that are difficult to liquidate. Often banks will split these funds into upper and lower level pools depending on the characteristics of the individual asset.
In 2019, under Basel III, the minimum total capital ratio is 12.9%, which indicates the minimum tier 2 capital ratio is 2%, as opposed to 10.9% for the tier 1 capital ratio.5 Assume that same bank reported tier 2 capital of $32.526 billion. Its tier 2 capital ratio for the quarter was $32.526 billion/$1.243 trillion = 2.62%. Thus, its total capital ratio was 16.8%(14.18% + 2.62%). Under Basel III, the bank met the minimum total capital ratio of 12.9%.
Tier 3 Capital
Previously the tiers of capital included a third layer. Tier 3 capital is tertiary capital, which many banks hold to support their market risk, commodities risk, and foreign currency risk, derived from trading activities. Tier 3 capital includes a greater variety of debt than tier 1 and tier 2 capital but is of a much lower quality than either of the two. Under the Basel III accords, tier 3 capital is being completely abolished.
List of Tier 1 Banks in Kenya
Here is a list of tier 1 banks in Kenya:
Absa Bank Kenya PLC
Absa Bank Kenya Plc, formerly Barclays Bank Kenya Limited, is a commercial bank in Kenya and a subsidiary of South Africa-based Absa Group Limited. It is licensed by the Central Bank of Kenya, the central bank and national banking regulator.
Number of employees: 1,991 (2020)
Founded: 1916
Headquarters: Nairobi, Kenya
Subsidiaries: Barclays Pension Services Limited
Parent organizations: Absa Group Limited, Barclays
KCB Bank
KCB Bank Kenya Limited is a financial services provider headquartered in Nairobi, Kenya. It is licensed as a commercial bank, by the Central Bank of Kenya, the national banking regulator. The bank has also been running Agency banking model.
Headquarters location: Nairobi, Kenya
Number of employees: 4901
Founded: 2015
Rating: B2 negative (2020)(Moodys Investor Service)
Number of locations: 207 Branches, 399 ATMs, 12,724 Agents, 8023 merchant outlets (2020)
Parent organization: KCB Group
Equity bank
Equity Bank Kenya Limited is a financial services provider headquartered in Nairobi, Kenya. It is licensed as a commercial bank by the Central Bank of Kenya, which is the central bank and national banking regulator of Kenya.
Founded: October 1984
Headquarters: Nairobi, Kenya
Key people: Ambassador Erastus J O Mwencha -Chairman; James Mwangi – Chief Executive Officer.
Parent organization: Equity Group Holdings
Cooperative Bank
Co-operative Bank of Kenya is a commercial bank in Kenya, the largest economy in the East African Community. It is licensed by the Central Bank of Kenya, the central bank and national banking regulator.
Headquarters: Nairobi, Kenya
CEO: Gideon Muriuki (2001–)
Revenue: 684 million USD (KES:75.04 billion, 2021)
Founded: 1965
Number of employees: 4,000+ (2018)
Subsidiaries: Kingdom Bank Limited (Kenya), MORE
Parent organization: Co-opholdings Co-operative Society Limited
NCBA Bank
NCBA Bank Kenya, whose full name is NCBA Bank Kenya Plc, is a commercial bank in Kenya. It is licensed by the Central Bank of Kenya, the country’s central bank and national banking regulator.
Headquarters: Nairobi, Kenya
Founded: 1959
Key people: Isaac O. Awuondo; Chairman; John Gachora; Group Managing Director
Number of employees: ~1,900 (2019)
Parent organization: NCBA Group Plc
Subsidiary: CBA Capital Ltd.
Standard Chartered Bank
Standard Chartered plc is a British multinational banking and financial services company headquartered in London, England. It operates a network of more than 1,200 branches and outlets across more than 70 countries and employs around 87,000 people.
CEO: Bill Winters (Jun 10, 2015–)
Revenue: 14.7 billion USD (2021)
Founded: 1969, London, United Kingdom
Number of employees: 85,000 (2022)
Subsidiaries: Standard Chartered Hong Kong
Parent organization: Standard Chartered Holdings Limited
Founders: Chartered Bank of India, Australia and China, Standard Bank
Stanbic Bank
Stanbic Holdings Plc, formerly known as CfC Stanbic Holdings Limited, is a financial services organization in Kenya. The Group’s headquarters are located in Nairobi, Kenya, with subsidiaries in Kenya and South Sudan. Stanbic Holdings is a member of the Standard Bank Group, a financial services giant based in South Africa. The institution is licensed and governed by the Central Bank of Kenya, the national banking regulator.
Founded: 2008
Headquarters: Nairobi, Kenya
Diamond Trust Bank (DTB)
Diamond Trust Bank Group, in short DTB Group, is an African banking group active in Burundi, Kenya, Tanzania, and Uganda.
Founded: 1945
Key people: Linus Gitahi; Chairman; Nasim Devji; Group CEO
Headquarters location: Nairobi, Kenya