Senate summons CBK Governor over Sh5 b capital requirement for banks

NAIROBI, KENYA: Senate has summoned the Central Bank of Kenya Patrick Njoroge to appear before it next week to shade light on the government’s plan to upscale minimum capital requirement for commercial banks to Sh5billion from Sh 1billion.

The minimum capital will be increased progressively for a period of three years.

Senators have criticised National Treasury Cabinet Secretary (CS) Henry Rotich’s decision to increase the figure and alleged mischief in the new policy.

The first implementation phase of the policy is set to take effect beginning December next year, even as the legislators protested the move, demanding that it be shelved or vacated until it is subjected to proper public participation.

The senators demanded that the CBK governor be invited to give guidance on the matter, faulting Rotich for overstepping his mandate.

Minority Leader Moses Wetangula (Bungoma) and Senator Chris Obure (Kisii) Obure expressed concern that the operationalization of the contested policy will have a significant change in the economic and a negative impact on the local players.

“CBK determines, sets and guides the monetary activity of each country. The governor should be invited to give his stand on this matter. During his interview, the governor noted that the policy is misguided and ill advised,” argued Senator Wetangula.

Senator Obure, “This policy must be subjected to public participation and allow for public scrutiny before it was operationalized. The governor’s input is required.”

Rotich has however defended the contested policy, saying it is meant to achieve a target of 10 percent annual average economic growth through mobilising both domestic and international and create a vibrant and globally competitive financial sector as envisage in Vision 2030.

The CS also alludes to the fact that Kenyan banking institutions are, therefore expected to be well capitalised to rise up to the challenge.

“Government aspires to transform Kenya into an international Financial Centre, which will attract international investments and participants in the financial services arena,” said Rotich.

He continued, “The Monetary Affairs Committee (MAC) also passed a resolution requiring all Regional partner states’ central banks to increase their core capital to 10 percent of monetary liabilities.”

Rotich further maintained that the policy is in line with the CBK requirement to increase its paid-up capital from Sh 5billion to Sh 20billion as provided for in the CBK Bill, 2015.

The policy will be implemented as follows, December 2016 (Sh 2billion), December 2017 (Sh3.5billion) and December 2018 (Sh5billion).

Presently, there are 44 banks in Kenya, with 21 of them having core capital of Sh5billion, 15 above Sh1billion and below Sh 2billion, seven have above Sh2 billion but below Sh 5billion and one bank has below Sh 1billion.

Rotich, who responded to questions sought by senator Wetangula through the finance committee chairman senator Billow  Kerrow (Mandera) failed to convinced the senators, resulting in the summon of the CBK governor.

“The governor should be further interrogated in the committee,” appealed Wetangula.

Speaker Ekwee Ethuro also directed the same.

Senators Mutula Kilonzo Jnr (Makueni), Wilfred Machage (Migori), Johnston Muthama (Machakos), Mutahi Kagwe (Nyeri), George Khaniri (Vihiga), Kimani Wamatangi (Kiambu), Henry Ole Ndiema (Trans Nzoia) and Boni Khalwale expressed their reservations that local banks will be disenfranchised.

 “Local players are being locked out. Can we consider shelving the policy until the public is involved?” questioned Khaniri.

Senator Kagwe stressed, “There is need to develop strong banks. We have many unbanked locals than those banked. We need to review the policy to cater for small banks with less capital.”

Machage regretted that there is mischief for business monopoly in the increasing the capital.

Wamatangi cautioned that the policy should be re looked at as established banks, which have built enough capital will push for a raise in the threshold to lock out competitors.