MPs want action on CBK staff over collapsed banks

CBK Governor Patrick Njoroge. [PHOTO:FILE/Standard]

Central Bank Governor Patrick Njoroge was yesterday put on the spot for being lenient on his staff and auditors involved in three collapsed banks.

Dr Njoroge was hard pressed to explain why he gave Deloitte, the same audit firm that oversaw Chase Bank’s books in the run-up to its collapse, the mandate to carry out due diligence on the lender’s books. Deloitte was engaged to find out if the bank could be revived.

National Assembly’s Finance, Planning and Trade committee chairman Benjamin Lang’at said Deloitte had a dramatic fallout with the bank before it went under and contracting it presented conflict of interest.

Chase Bank directors blamed Deloitte for making a surprise U-turn to classify disputed Islamic Bank products as insider lending despite having been its auditor for 20 years.

The troubled lender’s chairman Zafrullah Khan and group managing director Duncan Kabui then stepped aside following concerns over credibility of the bank’s financial statements.

Chase Bank published results without the auditors' qualified opinion, but the regulator forced it to restate its statement that saw its profits drop from Sh2.3 billion in 2014 to a loss of Sh742 million in 2015.

“Two reports were issued, then the CEO resigns, the chair resigns, if you handle a bank in such a  manner, even I would remove my money,” explained Lang’at.

The Governor said although there was a ‘perception’ of conflict of interest, CBK was confident on Deloitte’s professionalism in doing its work.

“We considered the fact that there may have been an impression of conflict of interest and understood the fact that there would be sufficient firewalls between the two sides of the institution in question (Deloitte). In most accounting firms that have management or other business services side, they have secure firewalls,” explained Dr Njoroge.

However, nominated MP Oburu Oginga said there was a clear conflict of interest and the ‘firewall’ argument was not sufficient explanation.

“There is no way an institution which is managed by the same umbrella organisation will be having some fire blocks which prevent information being shared. That is theory but in practice that is not true, the MP said.

Oburu also took on the governor for failing to act on his staff who colluded with the fallen banks’ officials.

Dr Njoroge said the insiders had actually turned informers to help CBK investigations into the fraud, but also acknowledged that there was no sufficient evidence to charge some of these lawbreakers.

“They will be held accountable, that we have not deviated from. However, they can be useful in terms of helping us uncover what happened... that is the sort of balance we are at,” the Governor explained.

The committee chairman expressed his disappointment stating that they expected the governor to clean his ‘own house’ with the same ruthlessness he went about cleaning the rogue banks.

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