CBK pays its chair Sh6m retainer in year of no meeting

The Central Bank of Kenya (CBK) paid its chairman, Mohammed Nyaoga, Sh6 million in allowances without holding a single board meeting — raising corporate governance queries in an institution that regulates the country’s financial services sector.

The CBK’s latest financial statement shows that Mr Nyaoga received the amount, which translates to Sh500,000 a month, as a retainer even as the institution remained without enough directors to form a quorum for meetings.

Mr Nyaoga’s huge retainer for no work done is effectively the price that the Kenyan public paid for President Uhuru Kenyatta’s decision to leave the bank without directors for almost two years.

Yesterday Mr Nyaoga said he had been paid a retainer but no sitting or mileage allowances during the period under review.

He, however, declined to disclose how much he is paid in retainers — contesting the Sh6 million captured in the financial statements.

“As to the details of the account figures clarify with CBK auditors,” he said.

Mr Nyaoga was the CBK’s only non-executive during the period under review.

READ: Uhuru appoints five CBK directors after two-year delay

Other members of the board in office at the time were Treasury Principal Secretary Kamau Thugge, who is an ex-officio director, and CBK governor Patrick Njoroge, an executive director.

As an ex-officio member of the board, Dr Thugge is paid sitting allowances and is not eligible for any other payment.

Non-executive directors do not take part in day-to-day activities of the CBK, mainly because they are meant to be independent overseers of the management.

The financial statements show that Dr Njoroge earned an average of Sh1.75 million per month last year, the CBK having booked Sh21 million for remuneration of executive directors.

Dr Njoroge, as governor, is the CBK’s sole executive director.

Previous year’s financial statements showed that the bank paid its seven non-executive directors Sh20 million for the six meetings held.

The revelation of the hefty payments to Mr Nyaoga’s retainer signals the CBK’s failure to exercise prudence in the management of its resources, which would make it difficult for the regulator to question similar behaviour by commercial banks.

Mr Nyaoga’s remuneration equals what chairpersons of commercial bank boards, who are faced with more strenuous governance tasks, are paid.

The chairman of Kenya’s biggest bank by assets, profitability and market share KCB, for instance, received a monthly fee of Sh500,000 along with a chairing allowance of Sh80,000, a telephone allowance of Sh30,000 and a lunch allowance of Sh3,500.

Non-executive directors of KCB Group are entitled to a monthly fee of Sh130,000, a chairing allowance of Sh70,000 and a sitting allowance of Sh65,000.

However, the CBK governor is paid less than most commercial bank chief executives.

Frank Ireri, the chief executive of the mid-sized bank Housing Finance, for instance, earned an average of Sh4.9 million a month in 2014 or nearly triple the CBK governor’s take-home.

The latest financial statement shows that the CBK’s total staff costs dropped by 30 per cent to Sh2.1 billion last year, pointing to possible job cuts in the organisation.

Sources at the bank have previously cited high turnover as one of the challenges the institution faces, with most of the exiting employees poached by commercial banks who pay much better salaries.

The CBK staff have been under the spotlight following claims that they are often compromised to ignore unethical practices that have led to the collapse of some banks.

In July Dr Njoroge said the CBK had hired 15 new staff members for its supervision department — a move likely to push up its payroll. The governor had indicated that he was looking for more talent to support his ambitions.

The CBK paid Sh181 million to its top management, up from Sh171 million, even as plans to restructure its management have remained in the cold for almost two years.

The bank advertised the new jobs two years ago, shortly before the exit of Njuguna Ndung’u as governor on advice from international consultant PWC.

The freeze of the plan has seen four top managers continue acting as directors for more than a year.

Those serving in acting capacity include Paul Wanyagi (currency operations and branch administration), Erastus Miriti (procurement, logistics and supplies), John Birech (financial markets) and Teresia Ng’ang’a (human resource and administration).

The financial statement also shows that employees of the Kenya Deposit Insurance Corporation (KDIC) were paid Sh170 million during the same period, a marginal gain from the previous year’s Sh168 million.

The KDIC was recently voted the best depositors protection fund in Africa following the critical role it has played after the fall of Dubai Bank, Imperial Bank and Chase Bank.

The CBK has reported an operating profit of Sh13.8 billion, nearly double the Sh7.3 billion it recorded over a similar period the previous year.

Its profits were largely driven by a spike in lending to commercial banks, which faced liquidity challenges caused by the collapse of the three lenders over the year.

Management said the bank will not pay a dividend to the government after the operating profit was wiped out by revaluation losses attributable to depreciation of the shilling, leaving the regulator with a net deficit of Sh4.6 billion.

This is the first time in four years that the CBK has reported a net deficit, having posted a surplus of Sh49.7 billion last year, riding on revaluation gains.

Decisions by the CBK over the collapse of Imperial Bank are currently being challenged in court on the basis that they did not have the support of a board.

Mr Kenyatta appointed five directors to the CBK board last week raising quorum for the meetings. A quorum of the bank is made of the chairperson, the governor and three other directors.

The new members are Ravi J Ruparel, Nelius W. Kariuki, Samson Cherutich, Charity Selina Kisotu and Rachel Bessie Dzombo. The new appointees will serve for a period of four years.

There are still three non-­executive vacancies on the board.