Liquidity in the Banking Sector

The Central Bank of Kenya has published it’s Q1 economic report with some mentions on the banking banking sector. The report notes that:

  • Some banks in the small and medium peer groups faced liquidity challenges in the quarter ended March 2016 due to spill over effects of placement of Dubai Bank in liquidation and placement of Imperial Bank under receivership in second half of 2015.
  • Liquidity distribution in the interbank remained skewed in favour of large banks with little trading across bank tiers reflecting cautious trading ..The Central Bank however, boosted interbank liquidity through reverse repos to needy banks.
  • Depositors migrated their deposits to selected medium banks and large banks. Most large banks rationed lines of credit affecting mainly banks in small and some medium peer groups.