KCB main branch - Bulluk, Juba/FILE PHOTO

South Sudan could expose Kenyan banks to serious risks if punitive sanctions are enforced against its leaders by the international community, the Central Bank of Kenya has warned.

CBK says South Sudan is the largest single country risk exposure for Kenyan banking groups that have set up subsidiaries, and the conflict in the country poses spill-over risks to Kenya’s financial system.

The Central Bank of Kenya has warned, in the Financial Sector Stability Report, that Kenya’s banking sector presence in South Sudan is significant and that conflict is likely to attract international sanctions and this would seriously affect doing business in the country.

It calls the on-going conflict in South Sudan as an elevated threat to Kenya’s financial system.

The Central Bank of Kenya says the three Kenyan banks operating in South Sudan would be forced to close their subsidiaries to avoid penalties if sanctions are imposed on the warring parties in South Sudan.

The international community has threatened to impose sanctions on the warring parties in South Sudan if they fail to end the 9-month conflict.

The Kenyan Commercial Bank Group says it is most vulnerable because it opened 31 branches in South Sudan as of December last year, while Equity Bank had nine and Co-operative Bank has one branch.

The 31 branches of Kenyan banks operating in South Sudan accounted for about 53% of the 5.2 billion Kshs., equivalent to $60 million, a gross profit earned by all regional subsidiaries last year.

South Sudan bank subsidiaries accounted for about $3.4 billion in total assets of all cross-border branches last year.

The Kenyan Central Bank says Kenyan banks made such a huge profit last year despite one of the subsidiaries in South Sudan registered a loss.