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NEWS & CURRENT AFFAIRS

The Nairobian

Central Bank of Kenya (CBK) seeks powers to name rogue banks

Business

By Alphonce Shiundu | Apr 27, 2016

*CBK Director of Bank Supervision Gerald Nyaoma after meeting the National Assembly Finance Committee at Continental House in Nairobi yesterday. He called for harsher fines for errant banks.* (PHOTO: BONIFACE OKENDO/ STANDARD)

Central Bank of Kenya (CBK) yesterday asked MPs to amend the law to give it power to publicly name and shame rogue banks.

Officials of the Bank Supervision Unit said the sanction was necessary to make sure banks respect the directives of the CBK as a regulator.

Director of Bank Supervision Gerald Nyaoma revealed that two of the collapsed banks had ignored the CBK’s directives on banking rules, and one had even paid the paltry Sh1 million fine three times, but still went on breaking the banking rules.

If they had been exposed publicly, he said, the banks would either have fixed the regulators’ queries or risked losing business.

He also called for harsher fines for banks as a deterrence.
“We need more transparency and accountability because that can have an effect on the managers of commercial banks to act on the recommendations of bank supervision,” said Nyaoma at a meeting of the National Assembly’s Committee on Finance, Planning and Trade in Nairobi.

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The remarks of the crucial unit came just a day before Chase Bank, one of the banks that had liquidity problems and weak systems that led to its closure, reopened.

Former governor

The committee is investigating the banking crisis following the collapse of three banks and the weak corporate systems and book-keeping queries at the National Bank.

Nyaoma said Dubai Bank had ignored the Central Bank five times between 2011 and 2015 and that is why two days after he got into the position last year under a new governor, his first duty was to put the bank under receivership. “This was a problematic institution. They were not implementing the recommendations. They were overdue for that receivership... we were even saying the lending was reckless,” he said.

Committee Chair Benjamin Langat (Ainamoi) said such impunity raised queries about the role of former CBK governor Njuguna Ndung’u in ensuring discipline in the banking sector. “We will need to talk to the former governor about this,” said Langat.

MPs also heard Imperial Bank had also pretended it had acted on the recommendations of CBK but had actually not done so.

Nyaoma said CBK was keen to crack down on fraudsters who used loopholes within the banks to access loans.

But the MPs were upset when Nyaoma confessed that CBK did not have ICT systems auditors and that the recruitment of three auditors was ongoing. That, Nyaoma confessed, was one of the reasons it missed clues on the malfeasance at Imperial Bank.