Annual REPORT

ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
NOTES TO THE FINANCIAL STATEMENTS (Continued)
5 CAPITAL MANAGEMENT (Continued)
Regulatory capital (Continued)
The Central Bank of Kenya requires each bank to:
a) Hold the minimum level of regulatory capital of Shs 1 billion.
b) Maintain a ratio of total regulatory capital; to risk weighted assets plus risk weighted off balance assets at above
the required minimum of 10.5%;
c) Maintain a core capital of not less than 8 % of total deposit liabilities
d) Maintain total capital of not less than 14.5% of risk weighted assets plus risk weighted off balance sheet items.
It is expected that with the introduction additional capital requirements which require the bank to have higher ratios
of total capital to risk weighted assets the capital requirements are going to be more stringent with expectation of
adoption of the additional capital requirements for market and operational risks. The bank has until December 2015 to
comply with the new capital requirements.
The Insurance Regulatory Authority requires Family Insurance Agency to maintain a minimum level of regulatory capital
of Shs 1,000,000. The agency has complied with the capital requirement.
The group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain future development of the business.
The impact of the level of capital on shareholders’ return is also recognised and the group recognises the need to maintain
a balance between the higher returns that might be possible with greater gearing and the advantages and security
afforded by a sound capital position.
The group and its individually regulated operations have complied with all externally imposed capital requirements
throughout the year.
The bank’s regulatory capital is analysed into two tiers:
· Tier 1 capital, which includes ordinary share capital, non-cumulative irredeemable non-convertible preference
shares, disclosed reserves such as share premiums, retained earnings, and 50% un-audited after tax profit less investment
in subsidiaries conducting banking business, investments in equity of other institutions, intangible assets
(excluding computer software ) and goodwill.
· Tier 2 capital, which includes 25% revaluation surplus which have received prior CBK approval, subordinated debt,
hybrid capital instruments or any other capital instruments approved by CBK.
The bank’s regulatory capital position at 31 December 2015 was as follows:
2015 2014
Sh’000 Sh’000
Tier 1 capital
Share capital 1,245,186 1,245,186
Share premium 5,062,519 5,063,676
Retained earnings 5,136,745 3,944,241
_________ _________
Total 11,444,451 10,253,104
_________ _________
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