Evaluating the Legal Framework Governing Mergers and Acquisitions of Commercial Banks in Kenya

Abstract

This paper explores the conduciveness of the legal framework governing mergers and acquisitions of commercial banks in Kenya and whether it is prudent to maintain it at the current level. The legal and institutional framework plays a vital role in promoting the growth of commercial banks, banking sector governance, consumer protection, and enhancement of international best practice. The 2030 vision for financial services in Kenya is to have a vibrant and globally competitive financial sector driving high-levels of savings and financing Kenya’s investment needs. It proposes to reform the banking sector to facilitate the transformation of the large number of small banks in Kenya to larger, stronger banks. Larger stronger banks may be created through mergers and acquisitions which as we shall see are one of the avenues that promote growth and broaden revenue resources. This vision may not be attained as it may be hampered by the current legal framework that is characterized by overlaps, duplications, multiplicity of laws and regulatory bodies. Banking and financial services is also a pillar of both the East Africa Community Vision 2050 and African Union’s Agenda 2063. To stimulate investment within the East Africa Community, the Community proposes to have competitive cross-border banking and financial products and services, focused on the needs or demands of citizens. To feed into both the East Africa Community and African Union Agenda, the legal framework governing mergers and acquisition activity of commercial banks in Kenya should be a tool for development and enhancement of vibrancy in the banking sector.