Commercial banks are set to report improved cash positions following instruction to include regulatory reserves in their reporting figures.
Banks had been accounting for cash set aside to meet regulatory requirements differently, forcing the accounting body to issue guidance in consultations with the Central Bank of Kenya.
Banks are required by CBK to hold a mandatory Cash Reserve Ratio (CRR) which is currently 3.25 percent of their deposits.
The restatement would see banks reporting higher cash positions reflecting more liquidity even though they can’t access the funds.
Improved liquidity could be crucial to banks, especially those not meeting the statutory minimum requirement. Besides the CRR, banks are also required to hold a minimum liquidity requirement set as 20 percent of their deposit base.
‘Previously, the reserves were excluded from the cash and cash equivalents. Following a reassessment of International Accounting Standard (IAS 7), banks are now required to include CRR as part of cash and cash equivalents; as they are demand deposits accessible on demand, with restrictions relating to use rather than access,’ said KCB Group.
KCB restated its cash position for the year 2024 by Sh29.9 billion.
Other banks that have restated their figures include HF Group and Family Bank.
‘The group reassessed this presentation in light of the requirements of IAS 7, as well as recent industry guidance issued by the Institute of Certified Public Accountants of Kenya (ICPAK) to enhance consistency in practice within the banking sector ,’ said HF Group.
The restatement boosted HF’s cash position by Sh1.4 billion.
Sources within ICPAK said most banks used to treat the reserves as receivables.
Kenyan banks have, however, been holding lots of cash in their vaults with workers and businesses preferring passive income over investing in enterprises.
The institutions’ liquidity ratio stood at an all-time high of 61.7 percent in February 2026 or Sh3.85 trillion from 58.3 percent in February 2025.
Liquidity ratio requires banks to hold at a minimum 20 percent of their deposit liabilities in cash or near cash assets which allow them to meet short term demands including customer withdrawals without distress.
A bank’s liquid assets include Treasury bills and short-term bonds, cash in vaults, deposits with other local and foreign banks and repurchase agreement facilities.
The banks’ high liquidity has been attributed to slow credit growth in the wake of flat demand for new loans that would allow businesses to generate new jobs.
Credit growth has been in the single digits for more than 18 months forcing the Central Bank to be aggressive on lowering of interest rates to stir borrowing.
The CBK considers credit growth of between 12 and 15 percent to be ideal for optimal economic growth and business expansion. The credit growth stood at 8.1 percent in the 12 months to March.