Treasury Cabinet Secretary John Mbadi and Central Bank of Kenya Governor Kamau Thugge are holding discussions to resolve a dispute over the deadline for commercial banks to achieve a KSh10bn core capital level.

The disagreement arose after Mbadi, in the 2026 Budget speech, announced an extension of the compliance deadline to 2032 and the removal of the regulator’s staged milestones, without moving the necessary amendments to the Banking Act.

In response, the regulator instructed banks to disregard the Treasury’s pronouncement and to continue following the original timetable of KSh5bn by the end of December 2026, KSh6bn in 2027, KSh8bn in 2028 and KSh10bn in 2029.

Sources said Mbadi met Thugge on Tuesday last week, shortly after the regulator ordered banks with core capital below KSh5bn to submit written explanations of how they will meet the 2026 target before the end of the month.

Thugge told the National Assembly Finance and National Planning Committee that the sector should explain how it will achieve the KSh5bn target, noting that one or two institutions might struggle.

Mbadi told Business Daily that the Treasury is keen to settle the standoff, describing the matter as “a simple matter” and saying any decision will be based on what is best for the economy.

The new capital framework was introduced in 2024 through the Business Laws (Amendment) Act, which lifted the minimum core capital floor from KSh1bn to KSh3bn and set a pathway to KSh10bn.

As at the end of June 2026, fourteen banks – including Middle East Bank, M-Oriental Bank, Bank of Africa, Premier Bank, Guardian Bank, DIB Bank and Habib Bank AG Zurich – reported core capital below KSh5bn, while seven banks – Credit Bank, UBA Bank, Development Bank of Kenya, African Banking Corporation, Access Bank, Consolidated Bank of Kenya and one other – had not met the KSh3bn target for December 2025.

The CBK warned that banks failing to honour the capital requirements could be downgraded, although no action has yet been taken.

The National Assembly Finance and National Planning Committee, chaired by Kuria Kimani, called for a balanced implementation to safeguard financial stability, competition and inclusion.

The Treasury argued that a longer timetable would avoid a slowdown in lending to households and businesses, a view echoed by Kenya Bankers Association chief executive Raimond Molenje, who said an extended period would enable banks to maintain credit flow.

Mbadi, who previously backed the capital increase, said in June that the transition must be managed to minimise disruption to micro, small and medium enterprises and other niche markets, and to preserve shareholder value and investor confidence.

Under the current schedule, banks must reach KSh6bn core capital by December 2027 and KSh8bn by December 2028 before the final KSh10bn target in December 2029.