Kenyan banks’ exposure to sovereign debt has gone up significantly since 2019 as a result of faster investment in risk-free bonds at the expense of lending to the private sector, with the lenders now holding twice as much of their net assets in government debt.
KBA noted that as a share of total capital, banks’ investment in government securities rose to 204 percent in 2021, compared to 181.7 percent in 2020 and 148 percent in 2019.
High exposure to government debt links banks’ creditworthiness to that of the government, which would leave them with a negative outlook for instance if the same were to be applied to the government by global rating agencies.
Rating agency Moody’s has in the past flagged this sovereign debt exposure as a concern.
Banks have generally been bulking up on their government securities holdings.
Private sector credit growth, therefore, remained below the pre-rate cap levels until June this year
Business Daily
Comments