Questions abound as Central Bank of Kenya trudges on without board

It is now nearly two years since Mohammed Nyaoga was plucked from Ecobank to chair the board of the most important financial institution in the country.

As the chairman of the Central Bank of Kenya (CBK), he is expected to lead a team that oversights a powerful board.

But the lawyer, has remained some sort of a flower girl at the institution, as President Uhuru Kenyatta drags his feet in naming eight other members to the board. Nyaoga has never held a board meeting since his appointment last June for lack of quorum.

Under the new Treasury guideline issued in March, the CBK chairman, who unlike the governor lacks security of tenure, will generally oversee the working of the country’s banking sector regulator.

As currently constituted, Mr Nyaoga cannot hold meetings or make board decisions.

Insiders say the institution risks finding itself on the wrong side of the law if it engages in any major procurement process without the oversight of a board committee.

An insider familiar with the operations of the bank told The Standard on Sunday it is ironical that the institution has been going tough on commercial banks to to set up and run credible boards yet the CBK itself lacks a substantive board.

“The board provides oversight and this is critical for the operations of the CBK. How do you even do procurement?” a source familiar with the operations at the bank said.

The insider said CBK Governor Patrick Njoroge needs the backing of a board to continue his cleanup of the banking institution. The absence of the board, he said, may jeopardise the process, especially on decisions that need the approval of directors.

“Why do you have a chairman who does not have members? It is such a shame that an institution such as the Central Bank can go for over one and a half years without a board,” the source said.

The CBK Board comprises 11 members consisting of the chairperson, governor, National Treasury PS or his representative who shall be a non-voting member, and eight other non-executive directors. A quorum for any meeting of the board shall be the chairperson, governor and three directors.

The CBK is also currently operating without one of its two deputy governors after long serving Haron Sirma quietly exited after his term expired.

Mr Sirma, who competed alongside Dr Njoroge to succeed former governor Njuguna Ndung’u is understood to have already cleared and left the building.

Dr Njoroge, who confirmed the exit, refused to comment on the process of his replacement on grounds that he was not the appointing authority. The CBK has also dropped Sirma’s name from its website. This has left Ms Sheila M’Mbijjewe as the only deputy governor.

At a time when the absence of the board has been partly blamed for the supervision failures at CBK, National Assembly’s Finance Planning and Trade Committee members sought answers on why it was taking inordinately long to pick a new board to guide the regulation of commercial banks.

The CBK is currently operating under the policies set by the old board, which held its last meeting in March last year.

Under the CBK Act, the board is supposed to meet not less than once every two months to discuss the regulator’s performance, check decisions made by management and consider capital investments.

Changes introduced in 2012 created a two-tier board to check the governor’s influence on the economy. The Monetary Policy Committee, which deals with the technical aspects of the economic and monetary issues, is chaired by the governor while the board of directors oversees the overall bank policy and monitors the governor’s performance.

Last week, Treasury Secretary Henry Rotich told Parliament that only President  Kenyatta could explain why CBK does not have a board of directors.

Rotich said he did not know when the names would be submitted to Parliament, but that the selection process was ongoing.

“That nomination is done by the President. We are in the final stages of making the nomination and that is why I said the names will be here shortly. As to when that is exactly, I do not know. If it was within my powers, I would give you the timelines right away,” said Rotich.

The chairperson and directors are appointed by the President with the approval of Parliament and hold office for a period of four years but shall be eligible for re-appointment for one further term of four years

The board is expected to appraise the performance of the CBK governor, determine the bank’s policy (other than formulation of monetary policy) and review how the institution uses its resources.

Previously, the governor chaired the CBK board meetings, a situation that presented a conflict of interest because the governor was literally supervising himself.

The Treasury is also considering additional amendments to the CBK Act which, if passed by Parliament, will hand the responsibility of recruiting and shortlisting future governors to board of directors.