The Central Bank of Kenya (CBK) has promised to take action against employees who will be found to have slept on the job after the second back went into receivership.
CBK Governor Patrick Njoroge, told journalists that investigations were still ongoing to establish the validity of the fraudulent claims at Imperial Bank.
Dr Njoroge, who remained economical with the exact details on the fraud that brought down the bank, however, admitted that the crisis had called into question CBK’s Bank Supervision department and quality of its monitoring mechanisms.
“There will be consequences if we find out that mistakes were made. Last week’s events have pointed out some weaknesses in the institution. How did we miss this in our surveillance? The quality of the CBK surveillance is as important as it is urgent,” Njoroge told journalists yesterday.
Imperial Bank was placed under receivership, locking out Sh48 billion in deposits belonging to 53,300 customers. Njoroge pointed out that the regulator is looking at keeping pace with the latest IT systems in the banking industry to be able to query it as well as analyse data.
Others who will be under close scrutiny by the CBK are the external auditors of Imperial Bank and the bank’s board of directors. It has also emerged that Imperial Bank actually reported the malpractices at the bank before CBK took action last week.
Njoroge said that the directors of the bank approached the regulator on their own motion of self-disclosure. “They presented to us credible evidence of unusual practices. Loans were granted outside established procedures. They asked CBK to protect the bank and that is why we decided to take action,” Njoroge said.
He maintained that he was fully involved in the decision even though he was out of the country when it happened. Njoroge had accompanied Treasury Secretary Henry Rotich to the annual World Bank and IMF meeting in Peru when the scandal broke.
He has, however, defended the action the regulator took on grounds that it was in the best interest of the sector and hoped the bank would be back to its feet soon, depending on the outcome of ongoing audit.
“This is an isolated case and we would like to assure the market that the banking industry is sound and this issue is not systemic,” he said.
