CBK pushes foreign banks to name local boards of directors
Posted Sunday, June 17 2012 at 14:39
Central Bank of Kenya is pushing foreign banks with local branches to name a committee controlled by local professionals to evaluate and approve decisions from the parent companies.
The CBK is asking the lenders to appoint at least five members to the committee whose responsibilities and powers will be equivalent to those of the board of directors.
The move is aimed at reducing the powers and influence of the multinational lenders in their local subsidiaries and ensure that their strategies are in tune with the market.
This will affect the operations of banks such as Citi Bank, Bank of India and Habib Zurich AG whose Kenyan operations, unlike those of Barclays Bank and Standard Chartered Bank, are branches of their parent company.
Other banks that are branches of foreign lenders are Habib Bank Ltd and Bank of Africa.
“Branches of foreign banks should have at least five members in their local committees whose responsibilities shall be as those of the board of directors as specified in this guideline,” said the CBK.
“While it is acknowledged that the strategies and policies are driven by the head office, in order to be consistent with its own strategies, the local board is expected to discuss, evaluate and provide input on strategies and policies to suit local environment as well as deliberate and approve major issues and decisions.”
The local committee will also have the responsibility of ensuring that the policies of the head office are aligned to the Kenyan laws and regulations.
The foreign branches ran as branches rather than as subsidiaries of their parent companies, and they are faced with increased regulations and higher taxes since they pay tax both in Kenya and in their home countries.
Bank of India had earlier told the Business Daily of its intention to petition CBK to allow it to run as an independent Kenyan bank and pave the way for a buyout of a local rival.
The bank has applied to the Central Bank of India and is set to put another application to CBK to be allowed to run as a full-fledged Kenyan bank and subsidiary of parent in India.
At present, the bank will have to seek regulatory approvals in India and Kenya and finance the transaction from the balance sheet of its parent company.
The CBK is also asking foreign-owned locally incorporated banks like Barclays Bank, Diamond Trust and Standard Chartered Bank to have a wide representation of locals in their boards.
Ecobank, Bank of Baroda, Gulf Bank, K-Rep Bank, UBA Kenya and First Community Bank also belong to this category of banks.