Central Bank governor draws stinging criticism as honeymoon ends

The challenge with the moral high ground is that it can be a lonely place. And as Central Bank of Kenya Governor Patrick Njoroge is finding out, defining his legacy by this yardstick is making him more isolated by the day.

Last week, the governor found himself at the centre of yet another vitriolic storm on the Internet, with users on social media platform Twitter weighing in on his actions and inaction, including remaining quiet on Family Bank when it was facing a crisis of confidence.

As one user, @KKipkorir, put it while commenting on the trend #AhmednasirSuesNjoroge: “Bloggers tried and failed, lawyers are now after him, soon politicians will topple him. Lobbyists are very powerful #AhmednasirSuesNjoroge.”

A few days later, Njoroge appeared before the National Assembly’s Finance, Planning and Trade Committee, a team he had seemed cozy with a few months ago.

“The last time I was here was the end of July, and since then, a lot has happened,” the governor began on a light note.

“Today I have rather uncharacteristically circulated a statement, I will go through it in some ways, not word by word, and give it some colour and, as we have done before, open the discussion to questions.”

Abuse of office

Three minutes into his speech, however, nominated MP Oburu Odinga interrupted, and set off what ended up being the most antagonistic interview the governor has had with members of Parliament yet.

“Mr Chairman, will it be in order for the governor to read to us what he has presented on record rather than going into long explanations?” Mr Oburu interjected.

The appointment of a full board led by Mohamed Nyaoga to keep CBK in check has seemed to embolden Dr Njoroge’s detractors to question his judgements and no-nonsense decisions that have shaken the banking sector.

Immediately after Ravi Ruparel, Nelius Kariuki, Charity Kisotu, Rachel Dzombo and Samson Cherutich were gazetted as board members, lawyer Ahmednasir Abdullahi wrote to the Ethics and Anti-Corruption Commission (EACC) with a demand. He wanted Njoroge investigated for abuse of office and usurping powers of the board by running the country’s regulator as a “one-man show” for close to 18 months.

Mr Abdullahi argued that section 13 of the Banking Act states that the governor cannot incur any expenses without board approval. The clauses in the section read that “the Governor shall have the authority to incur expenditure for the Bank within the administrative budget approved by the Board”.

Incidentally, Abdullahi, who also represents shareholders of Imperial Bank, which was placed under receivership in October last year, cited the same argument in court in defence of the lender.

The lawyer argued that Njoroge, who was appointed in June 2015, made the decision to close Imperial Bank as an individual, which was against the law as CBK did not have a properly constituted board of directors at the time.

The Kenya Deposit Insurance Corporation (KDIC) and CBK had attempted to disqualify Abdullahi from the Imperial Bank case.

Power and authority

The CBK governor has maintained he has been acting within the law, and that the delay in constituting the board was occasioned by President Uhuru Kenyatta, who is the appointing authority. Njoroge has also remained unapologetic.

“As the chief executive of the CBK, I have the power and the authority to incur expenditure. I cannot answer where there has been a delay in appointing the board, but now we have one anyway, so what is the big issue?” Njoroge asked at a press briefing last week.

The board will serve four-year terms and is expected to meet at least once every two months to discuss the regulator’s performance, check decisions made by the management and consider capital investments. Under the board, the governor will have to strike a chord to police a sector with the financial muscle to undertake serious lobbying.

Parliament’s Finance committee has also been demanding the Central Bank’s forensic report on Imperial Bank, something the lender’s shareholders have also been trying to lay their hands on.

However, the regulator said a court ruling allowed it to keep the contents of the report secret so that it does not prejudice cases in which it is seeking Sh82 billion in assets from the masterminds of the Imperial Bank fraud.

The MPs appeared displeased that they did not get the forensic report, instead only getting a brief on the progress CBK and KDIC had made on Imperial, Dubai and Chase banks, which are all under receivership.

The governor expressed his frustration at delays in prosecuting the perpetrators who sank Imperial and Dubai banks, including counter suits and a slow process.

“Moving from evidence to courts and to convictions is something we have raised with the Chief Justice, but we also look to you for support,” Njoroge said.

Open banks

But the MPs wanted more, and demanded the governor deliver the forensic report, even if it is still at the interim stage.

“We need to know where we are and timeframes. We were told three months, and three months have elapsed and another three months. When are we going to open these banks? That’s what we want to know, and if not, we should be told why,” North Imenti MP Abdul Rahim Dawood said.

The governor pointed out that for one case alone, Imperial Bank, the US-based FTI Consulting audit report unearthed 2,000 pages of documents. In another case, the forensic audit presented 85,000 pages of documents.

He added that the matters were subject to ongoing legal proceedings and therefore prohibited from public discussion outside the courts.

The MPs were still not convinced.

“The governor is going round and round ... it’s something we can get in the press so I don’t see what the point of us coming to this meeting to get a brief we can read in the newspaper is. We need to be told concrete things because we do not need to be told every other time we are meeting the CBK that this is what is happening and there is nothing that has come up,” Mr Dawood said.

Dented confidence

The MPs even offered to kick out journalists to get the governor to give them details.

“Parliament has a mandate to investigate, but we realise there might be certain sensitivities, for instance, the forensic report. I think this committee must be able to discuss the forensic audit itself. All we are seeing here is being told a forensic audit is being used,” nominated MP Johnson Sakaja said.

“We need to understand exactly what went wrong with these specific banks so that we can ensure there is a safeguard against that happening in other banks, which can be discussed in camera.”

The legislators were also unhappy that Njoroge was being seen as lenient on his staff and auditors linked to the collapse of the three banks. They questioned the governor’s decision to contract Deloitte to do due diligence on Chase Bank, even though the firm had been the lender’s auditor for 20 years, during which it is accused of disguising insider lending as Islamic banking products.

Mr Oburu took on the governor for failure to act on his staff who have been accused of colluding with the troubled lenders. The MP added that the governor’s indecisiveness in firing his own staff and charging them with collusion had dented their confidence in him.

“Either the governor does not know what is happening at his bank if at the end of the year he does not have evidence about the perpetrators. Initially, we thought that yes, the way you put these banks into receivership and all that, you were on top of things. But I do not know, I am getting doubts now,” Dawood said.

This fallout with legislators comes at a time when lobbyists have intensified their attacks on Njoroge in what is shaping up to be a high-stakes attempt to sway public opinion.

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