Treasury finalises picking of CBK board of directors
What you need to know:
The minister said the financial sector had become complex in the last three decades prompting the need to improve supervision, especially also in view of banks’ regional expansion.
Former CBK governor Njuguna Ndung’u was always against the appointment of a chairman for the regulator.
The Treasury has finalised picking names of Central Bank of Kenya (CBK) board of directors and expects them to be appointed soon.
Treasury secretary Henry Rotich yesterday said the names would be forwarded to the President who would in turn appoint them before seeking approval of Parliament.
Mr Rotich was responding to a question from the Business Daily after a signing ceremony for a Sh1.8 billion loan from the Belgium government for water projects in Vihiga County.
The lack of a board of directors at the CBK has become a major point of focus following a crisis of confidence in the country’s small banks after failure of three institutions such as Chase, Imperial and Dubai banks and suspension of six managers at the National Bank of Kenya.
Such a board would be expected to have a committee specialising in matters relating to ensuring the stability of the financial sector as a whole. “We have finalised on the names on the board members. They will be appointed by the President and then approved by Parliament. We expect this to happen very soon,” said Mr Rotich.
The CS, however, said that the absence of a board did not mean that the financial sector was under threat since the governor was charged with ensuring risks are minimised.
Become complex
“The fact that there is no board does not pose any threat to the sector. The board is only for making policy. “The CBK management is fully in charge. What has happened so far isn’t systemic,” said Mr Rotich.
The minister said the financial sector had become complex in the last three decades prompting the need to improve supervision, especially also in view of banks’ regional expansion.
The term of the board of directors of the CBK ended last year but only chairman Mohamed Nyaoga has so far been appointed.
Questions have been raised in the past as to whether having a board would not seriously compromise the independence of the office of the governor. In this regard, it has been pointed out that there are many jurisdictions in which the governor is also the chairman of the board as is the case in the US.
Former CBK governor Njuguna Ndung’u was always against the appointment of a chairman for the regulator.
However, it has equally been argued that without the board, the governor and the central bank’s top management can have undue sway on the running of the institution to the detriment of a country’s financial stability and monetary policy implementation. Before Mbui Wagacha was appointed acting CBK chairman to oversee the top management headed by Prof Ndung’u — following change in law — the central bank’s board and management had remained under the sole direction of the governor for decades.
In the past some of the governors of the CBK had faced serious accusations of mismanagement or performing below expectations. The fictitious multibillion export compensation scandal — also called Goldenberg — took place under the unwitting eye of Eric Kotut while the collapse of Eurobank, in which records were burnt to hide incriminating evidence, happened under Nahashon Nyagah as the CBK governor.
