Central Bank of Kenya governor mocks investors’ appetite for caps and power-banks

Central Bank of Kenya Governor Patrick Njoroge has scorned shareholders for reducing annual general meetings to discussions on umbrellas and caps.

CBK Governor Dr Patrick Njoroge. [Photo: WILLIS AWANDU/standard]

Rather than interrogating the numbers presented in annual reports for companies, including commercial banks which he regulates, investors use the yearly rituals to demand for small gifts that also include power banks.

The call for bigger involvement of investors in the running of their companies comes after a series of collapses of major businesses, following years of hidden information and falsified accounts by their managers. "I want to see some serious discussions around those numbers, and not discussions about umbrellas, baseball caps and lately power banks," Dr Njoroge said, after giving a status update on the collapsed Chase Bank on Friday.

The bank was clamped down some 10 days ago, following panic cash withdrawals by anxious depositors within hours of a rumour that went viral questioning the stability of the lender. Two directors of the bank were found to have irregularly been granted loans of more than Sh16 billion – about a fifth of the entire loan book, in an illegality that could easily escape the shareholders' eye.

Kenya has 11 listed banking institutions, including one mortgage lender Housing Finance. While Chase Bank is not listed on the stock exchange, it has a broad ownership by individual, local and international institutional investors from German, France and Switzerland.

But Mr Njoroge's sentiment on shareholders' role extends beyond the banking sector. The problem in Kenya could be much bigger given that some of the individual shareholders are elderly and unable to read or write.

Major shareholders in the respective firms often decide the agenda for the annual general meetings, and have little, if any, input from individual investors whose concerns however legitimate are ignored.

Decisions taken at AGMs are made much earlier, while the individual shareholders are only invited to rubber-stamp the resolutions. It is likely that their diminishing role has fueled the apathy that in the end reduced the minority shareholders to look out for the gifts that Dr Njoroge is now mocking.

The CBK governor outlined the tough conditions tied to the emergency kitty set up earlier last week structured to help struggling banks mend their cash positions and handle shocks such as the panic withdrawals that sunk Chase Bank.

Njoroge said banks seeking to use the 'unlimited' facility will have to satisfy a host of requirements, including having collateral in the form of government securities, which the credit will be extended against.

However, by Friday last week, no bank had sought the assistance from the facility despite being interest-free, possibly due to the conditions tied to the borrowing. Use of that facility would result in deeper scrutiny by the CBK, on a minute-by-minute oversight.

"CBK will be all over you, literally," Njoroge said in explaining the credit facility.

A qualifying applicant would in the first instance prove that they are in distress, that would include broken relationships with its peers – which are typically the first stop for banks.

CBK will then demand of the applicant to illustrate an action plan of re-establishing the relationships, and other remedial measures including offloading of forex reserves to shore up local currency positions.

Njoroge disclosed that 'upwards of five' suitors had expressed interest in buying out Chase Bank – which had about 1400 workers, whose fate remains unknown.?