The Central Bank of Kenya (CBK) said Friday it’s vetting directors of banking institutions and senior managers afresh to weed out people with questionable integrity or conflicts of interest.

central bank kenya
Central Bank of Kenya
CBK chairman Mohamed Nyaoga said the re-vetting has been necessitated by recent bank failures that threatened to crush the confidence in Kenya’s banking system.

“Most of the banking problems we have had were related to weak corporate governance perpetuated through internal fraud,” Nyaoga said in Nairobi when he opened the Centre for Corporate Governance (CCG) Alumni Grand Reunion.

He said fresh vetting, backed with strengthening of banks’ corporate governance structures, would ensure holders of board and management play their roles effectively.

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“CBK has put in place stronger governance measures, among them re-vetting of directors and senior managers when they are under any disciplinary action or for any violation of the law or suspected malpractices,” he said.

Anxiety gripped bank customers in the past year after three commercial banks put under receivership due to, amongst other reasons, irregularities and malpractices which exposed depositors, creditors and the banking sector to financial risk.

The recent bank failures include Dubai Bank, Chase Bank and Imperial Bank. Chase Bank was revived almost immediately while Imperial Bank, where 420 million dollars was lost, is still under receivership.

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CBK says it has increased vigilance on banks to ensure stability in the industry.

Nyaoga said the regulator has fortified its supervisory staff and recruited more experts in ICT and auditing to enhance scrutiny of banks processes including corporate governance practices, integrity of information and disclosure requirements.

During the event, the Centre for Corporate Governance launched a continent-wide network of good corporate governance champions drawn from its pool of 13,184 alumni, which will ensure the transformational role of best practices is felt in various organizations.

“We must see the impact of corporate governance beyond boardrooms into the societal, national and international arena,” said CCG chief executive Dr Joshua Okumbe.

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Okumbe said corporate governance has a significant impact on the strategic direction economies take, both at corporate and national levels in mobilizing and allocation of resources.

He noted that recent corporate failures in Kenya such as Uchumi Supermarkets were a result of lack of best practices in governance.

Okumbe said corporate governance is especially important in banks since financial institutions affect the lives of many people. Enditem

Source: Xinhua/NewsGhana.com.gh

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