Executive summary

The Banking (Fees) Regulations, 2026 (Regulations) introduce a revenue-based annual fee structure under which banking institutions, financial institutions and mortgage finance companies must pay annual fees calculated as a percentage of gross annual revenue, at the rate of 0.13% in 2026, 0.14% in 2027 and 0.15% from 2028 onward.

This represents a significant departure from the previous regime under which a fixed licensing fee was payable for each branch of a regulated institution based on its location.

Under the new framework, annual regulatory fees will become a variable cost linked directly to an institution's gross annual revenues. Larger institutions thus will likely bear a greater proportion of regulatory costs than smaller institutions.

Key features of the Regulations

Transition from branch-based to revenue-based fee model

Significantly, the Regulations replace the longstanding branch-based fee structure with a revenue-based approach. Previously, annual fees were payable for each of an institution's branches. Under the new framework, fees will be calculated as a percentage of gross annual revenue, an approach that is potentially more equitable.

The previous framework imposed a fixed fee for the head office, together with additional fees based on the number and location of branches. However, this does not take into account today's banking environment, in which digital channels, mobile banking and technology-driven service delivery have significantly reduced the importance of physical branch networks.

Nevertheless, the revised fee structure is likely to result in a material increase in regulatory costs, particularly for larger Tier I institutions with substantial revenue bases.

Application fees

An institution applying for a license under section 4 of the Banking Act must pay a one-time application fee of 5,000 Kenyan shillings (KES) to the Central Bank of Kenya (CBK).

The application fee is separate from the annual licensing fees payable after a license has been granted.

Annual fee structure

The Regulations introduce a phased increase over three years before the rate stabilizes at 0.15% from 2028 onward.

Annual fees are based on gross annual revenue at the following rates:

Newly licensed institutions

Fees payable by licensed institutions yet to commence business will be computed as a percentage of the institution's average projected gross annual revenue for the first three years following the grant of the license.

Accordingly, revenue forecasts and financial projections submitted during the licensing process will have a direct impact on the institution's initial fee obligations.

Gross annual revenue

The Regulations adopt a broad definition of gross annual revenue, which includes:

• Interest income from loans and advances
• Interest income from government securities and placements
• Fees and commissions on loans and advances
• Dividend income
• Foreign exchange trading income
• Any other income reflected in the institution's audited and published financial statements

Given the breadth of this definition, most revenue streams generated by a licensed institution are likely to form part of the annual licensing fee calculation.

Payment requirements

Annual fees must be paid to the CBK as a single lump-sum payment.

Institutions should therefore confirm that adequate provisions have been made to meet the applicable payment deadlines.

Consequences of noncompliance

The Regulations impose significant penalties for nonpayment of annual fees.

An institution that fails to pay the annual fee by the prescribed due date becomes liable to pay double the annual fee within 90 days. Continued noncompliance may result in revocation of the institution's license under the Banking Act.

The penalty framework creates both financial and regulatory risks for institutions that fail to comply with their payment obligations.

Summary of key requirements and timelines

Implications

The Regulations introduce the most significant reform of Kenya's banking licensing fee regime in over three decades, replacing the longstanding branch-based model with a revenue-linked approach.

Though the final fee rates are substantially lower than those the CBK initially proposed, the Regulations signal a clear shift toward a funding model that aligns regulatory fees with the scale of an institution's business, rather than its physical footprint.

Licensed institutions should consider assessing the financial impact of the new regime, reviewing the computation of gross annual revenue for fee purposes, incorporating the revised costs into budgeting and financial planning processes and implementing appropriate controls to ensure timely compliance and avoid regulatory sanctions.