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Economy

Why National Bank sent six executives on compulsory leave

Munir Ahmed was Tuesday suspended along with five other top managers of National Bank. PHOTO | FILE
Munir Ahmed was Tuesday suspended along with five other top managers of National Bank. PHOTO | FILE 

National Bank of Kenya managing director Munir Sheikh Ahmed and five top managers were Tuesday sent on compulsory leave pending investigations into alleged breach of fiduciary duty and failure to adhere to corporate governance rules.

The bank did not name the five executives in a statement it sent to the media.

“We have instituted an internal review of our financial performance and as part of the mentioned tenets, the internal audit process shall be independent hence the request by the board for the six managers to proceed on leave,” said the bank’s chairman, Mohamed Hassan.

National Bank made the announcement Monday evening following a series of multi-pronged audits that the Central Bank of Kenya(CBK) and the Capital Markets Authority ordered and which found massive gaps in the bank’s books.

The bank, which is 22.5 per cent owned by taxpayers through the Treasury, re-appointed Deloitte & Touche as its auditors during the last annual general meeting held in March 2015.

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The six suspended executives are now expected to present themselves for questioning during the ongoing forensic audit.

Workers, through the National Social Security Fund (NSSF), are the largest shareholders at National Bank with 134.5 million shares or a 48.05 per cent stake.

The bank had over the Easter weekend sent out two panic statements stating that the ongoing scrutiny of its accounts was in line with CBK operational guidelines.

“The aforementioned actions by the board are an unequivocal demonstration of our commitment to strict adherence to corporate governance tenets and the various CBK guidelines,” said Mr Hassan in a statement.

Mr Ahmed becomes Kenya’s first banking chief executive to be sent on compulsory leave in more than a decade.

Insiders said the drastic action to suspend Mr Ahmed follows a firm stance the CBK governor, Patrick Njoroge, has taken over regulatory matters.

National Bank had customer deposits amounting to Sh93.6 billion in September 2015 but is yet to publish full-year results.

The bank, however, said it did not expect the executive changes to affect normal operations.

Wilfred Musau, the bank’s director, retail and premium banking, takes over as acting managing director pending conclusion of the audit.

“The board will make further appointments albeit, on an acting capacity within 24 hours,” the bank said regarding the five other top managerial positions that are now vacant. 

Mr Ahmed was hired in August 2012 as part of efforts to make National Bank a more profitable lender and transform it to a tier-one lender.

A former Standard Chartered Bank executive, Mr Ahmed holds a Master of Business Administration degree and a Bachelor of Commerce degree from the University of Nairobi.

“The bank finally wishes to acknowledge that a series of multi-pronged audits by various bodies, including the internal auditors who report to the board of directors, Central Bank of Kenya and external auditors continue to be conducted every quarter in line with the regulator’s operational guidelines,” National Bank said on Good Friday, seeking to dispel rumours about its financial health.

The lender put out another statement on Easter Monday requesting “members of the public and the media to disregard false stories spread by a malicious blogger and other ill-intentioned persons on social media about the bank, its chairman and managing director”.

This is the umpteenth time National Bank is being caught in regulatory cross-hairs. The bank in April last year suspended its finance director, Chris Kisire, after he was linked to the gross mismanagement at Mumias Sugar.

Mr Kisire’s name was included in President Uhuru Kenyatta’s list of corrupt public servants tabled in Parliament in March last year.

National Bank was also listed as one of the conduits through which former Imperial Bank managing director Abdulmalek Janmohamed siphoned cash from the bank.

Court papers say that Mr Janmohamed, who died last year, used a National Bank of Kenya local currency account number 0100365102900 to wire cash to his entities.

Imperial Bank was placed under receivership in October last year after the board of the mid-sized lender alerted it to alleged malpractices.

Naeem Ahmed Shah, who was head of credit at Imperial Bank, and James Jamlick Kaburu, who was head of finance, are among those who have been charged with  defrauding the bank of Sh29 billion through a falsified overdraft disbursement scheme.

A parliamentary watchdog committee report last year also unearthed a scheme where senior Interior ministry officials used a secret bank account at National Bank to siphon billions of shillings in taxpayers’ money in the run-up to the 2013 General Election.

The ministry stands accused of running a clandestine account at National Bank where Sh2.8 billion was wired and spent on items marked as ‘confidential,’ the Public Accounts Committee (PAC) said in an audit report for the year ended June 2013.

“To circumvent regulation, the ministry operates an account at National Bank of Kenya (NBK) parallel to the regular account at the Central Bank of Kenya (CBK),” said the committee report.

National Bank cited customer confidentiality rules, saying it could not name the signatories to the Kenya Police Service slush fund.

Treasury secretary Henry Rotich last week withdrew Sh4.9 billion set aside for participation in National Bank’s planned rights issue citing delays in the process.

Mr Rotich reallocated the cash in the supplementary budget, casting doubt on the feasibility of the rights issue which has been in the works for the past three years.

The bank’s shareholders in 2013 approved a plan to create an additional 800 million new ordinary shares to be floated in a rights issue expected to raise about Sh10 billion to finance expansion and growth.

National Bank also planned to use funds raised from the cash call to redeem its 1.135 billion preference shares held by the Treasury and the NSSF at a cost of Sh7.09 billion.

The preference shares —which have a par value of Sh5 a piece — were to be cashed with a 25 per cent premium, translating to Sh6.25 per share.

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