Employees of the Central Bank of Kenya have been threatened with death in the fraud probe against closed banks.
The shocking revelation was made by CBK Governor Patrick Njoroge, who vowed not to bend the rules even in the face of the threats.
Appearing before a Senate committee, Dr Njoroge said the regulator was under immense pressure to go slow on banking supervision.
The tougher scrutiny under Njoroge has exposed runaway fraud and other malfeasance in some commercial banks, which have since been closed and put under receivership.
“My people have been under pressure. There have been threats to their lives. We understand what we are dealing with, and at the end of the day we must do it for our country," said Njoroge at a meeting with the Senate's Committee on Finance, Commerce and Budget in Nairobi's County Hall.
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Although he did not name the source of the threats, he hinted at powerful cartels in some of the three banks where the regulator is conducting a forensic audit to nail multi-billion-shilling fraudsters and money-launderers.
"The one thing that worries me the most are my staff. I will do anything and everything to protect them. I will do everything to ensure that nothing happens to them," the CBK boss told senators who sought to know the measures he had taken to shield the said staff. The three banks under investigation are Dubai Bank, Imperial Bank and Chase Bank.
The governor said CBK had stepped up scrutiny of the books of all commercial banks. He vowed not to bend the rules because, in his view, it was the lax implementation that had led to the collapse of the three banks.
"We were avoiding the short-term problems, but they grew bigger and bigger. It is that culture of forbearance that set the commercial banks on a bad path because they know they have leeway with the regulator," said the governor.
"The time for forbearance is over. If the law says a bank has to do something, then that has to be done!"
CBK Supervision Director Gerald Nyaoma told the legislators that the regulator would no longer depend on periodic reports from managers on the health of the banks, but would instead directly go for the information in their systems.
"We want to go into the core banking system to extract information," said Mr Nyaoma. He said some directors, including those of Imperial Bank, had actively concealed crucial information and only came out when it was clear they were in dire straits.
Committee chairman Billow Kerrow (Mandera) and members Peter Mositet (Kajiado), Mutula Kilonzo Jr (Makueni) and Wilfred Machage (Kuria) also questioned the governor on why Imperial Bank stayed closed while Chase Bank was re-opened fairly quickly.
The CBK boss explained that Chase Bank was reopened because shareholders were "supportive". Chase Bank fired rogue directors when asked to, unlike in the case of Imperial Bank where the shareholders were "not supportive", he said.
"The Imperial Bank shareholders said they had Sh10 billion that we could use to reopen the bank. We said, fair enough, bring the money. Put the money in the account. Six months later, we have not seen the money," said the governor. Some Sh40 billion is required to re-open Imperial Bank and lift the receivership, but first the demons that led to the collapse had to be exposed, the governor said.
The bank, he said, was closed because of "widespread manipulation of the banking system to conceal financial malpractices, indication of money laundering and cheque-kiting schemes in the bank, a huge bad loan book, fictitious deposits and conflict of interest by shareholders and directors". The bank is being audited.