The standards of oversight have improved greatly over the years, with lessons taken on board from the spate of bank collapses in the early 1990s and more recently in 2015.
The Central Bank of Kenya (CBK) has tightened supervision on matters such as corporate governance, ownership, capital adequacy and prevention of money laundering.
The disclosure by the Capital Markets Authority (CMA) that it took an IT audit on collapsed lender Chase Bank to unearth details of billions of shillings siphoned from the bank should alert regulators of the need to tighten oversight on institutions handling the public’s money.
Banks normally have their financials audited annually. But the fact that their IT systems are not part of these audits is a loophole that was exploited by the rogue Chase Bank managers, and one that could still be used today by people of similar intent.
This also means that depositors and shareholders risk not getting the correct picture of the health of the institution.
Given their key role in financial intermediation, banks are sensitive institutions whose stability is key to the proper functioning of the economy. They must therefore be subjected to the highest audit standards.
Any suggestion that there is material information that is being withheld will only serve to spook depositors, and by extension investors in the sector.
Granted, the standards of oversight have improved greatly over the years, with lessons taken on board from the spate of bank collapses in the early 1990s and more recently in 2015.
The Central Bank of Kenya (CBK) has tightened supervision on matters such as corporate governance, ownership, capital adequacy and prevention of money laundering.
This has meant that banking sector credibility has gone up, a fact that has underpinned the impressive growth in financial inclusion in the country to 83.7 percent.
These gains, and the overall credibility of the banking sector, must therefore be guarded jealously.
It is thus imperative that the central bank take a lesson from the Chase Bank saga and expand the scope of the annual audits to include IT systems, which is where mischief is highly likely to take place.
With banks increasingly going digital, it would be inconceivable that this platform would be excluded from regular oversight.
Audit firms must also up their game and make IT audits part and parcel of their work with banks, and should they need new regulations to guide this, then the CBK ought to facilitate this.
This is the only way that bank depositors can be reassured that the institutions are safe from fraudulent deals behind the scenes that would expose them to painful losses such as those suffered by the customers of the three lenders that collapsed in 2015 and 2016.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
