Bankers to introduce tough rules to weed out ‘bad apples’

The Kenya Bankers Association (KBA) is working on a self–regulatory framework and standards that will see it take a legal stand on any member involved in unethical practices.

Kenya Bankers Association Chief Executive Officer, Habil Olaka adress a press conference during the signing of on to the "Code of Ethics for Business in Kenya", and announced plans to adopt a Self-Regulatory Framework and Conduct Standards for member banks ahead of the KBA Annual General Meeting to be held in June 2016.this was held on 21/04/2016 in a Nairobi hotel. Photo by WILLIS AWANDU

The standards, which will be adopted in June during the KBA Annual General Meeting, will seek to address issues specific to the banking industry in order to complement the existing Code of Ethics for Business in Kenya.

This was revealed yesterday by KBA Chief Executive Officer Habil Olaka who said that the current financial situation calls for strengthening of consumer protection to regain market trust and confidence.

“We have taken this proactive approach to safeguard the interests of all stakeholders  and are committing to establish specific ethical standards and requirements that our members must adhere to,” explained Mr Olaka.

Through the forthcoming self-regulatory framework, Olaka revealed KBA would be taking punitive measures against rogue banks including expelling them from the association.

He added that the industry operates in a complex environment which requires a clear set of standards that will help complement individual bank’s code of ethics. Speaking at the same function, Kepsa Chief Executive Officer Carole Kariuki said that while Central Bank of Kenya (CBK) has a role to play, there is need for every financial institution to ensure sound operations.

“Each sector needs to be self-regulating. Professional associations and business member organisations understand the specific needs of their industry and are better placed to monitor corporate governance,” she said.

Through the standards, Olaka said, the industry would demonstrate that it is capable of managing its affairs in a manner that caters for all stakeholders. “The recent industry developments that led to Chase Bank being placed under receivership and the discourse around the state of banking sector have proved detrimental in relation to public trust,” he noted.

Olaka admitted that Chase’s case hurt the image of the industry leaving many Kenyans with questions on whether banks and auditors involved had fulfilled their fiduciary responsibilities. However, he pointed out that since CBK Governor Patrick Njoroge declared 2016 a transformation year, banks and auditors have had to up their game in ensuring transparent disclosures.

“We saw a bit of unexpected returns in the numbers that were reported. You saw most banks increase their provisions [for non-performing loans]. They have no option but to reflect a true and fair view in their books,” he said.