HF moves to cut Equity Bank sway in its boardroom

Housing Finance managing director Frank Ireri. Housing Finance has begun the search for new directors to meet governance rules that may reduce the influence of Equity Bank in operations of the mortgage firm. Photo/FILE  NATION MEDIA GROUP

By MICHAEL OMONDI


IN SUMMARY
Central Bank of Kenya (CBK) has given lenders until June to ensure that at least a third of board seats are held by independent directors.
The other directors save for the CEO Frank Ireri have been tapped by its principal shareholders including the National Social Security Fund (NSSF), Britam and Equity Bank — whose four directors sit on the board of mortgage firm Housing Finance, which is not a subsidiary of the bank.
Equity owns 24.9 per cent of Housing Finance while Britam and NSSF control 21.4 per cent and 6.81 per cent of the mortgage firm.

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HF moves to cut Equity Bank sway in its boardroom


Housing Finance has begun the search for new directors to meet governance rules that may reduce the influence of Equity Bank in operations of the mortgage firm.

Central Bank of Kenya (CBK) has given lenders until June to ensure that at least a third of board seats are held by independent directors.

The banking regulator defines an independent director as a board member who is not a direct or indirect representative of the principal shareholders, has not worked in the bank as an executive for the past five years and has not had any business relationships with the institution in the same period.

Housing Finance is one of the banks that have not met the one-third threshold given that its seven-member board only has one director who qualifies as an independent director based on the CBK definition.

The other directors save for the CEO Frank Ireri have been tapped by its principal shareholders including the National Social Security Fund (NSSF), Britam and Equity Bank — whose four directors sit on the board of mortgage firm Housing Finance, which is not a subsidiary of the bank.

“We have started the recruitment of additional non executive directors in line with CBK requirement,” Mr Ireri told the Business Daily Thursday.

Significant suppliers of the lenders or relatives of senior managers and those with a direct or indirect shareholding of more than five per cent in the appointing banks are also not considered independent.

Equity owns 24.9 per cent of Housing Finance while Britam and NSSF control 21.4 per cent and 6.81 per cent of the mortgage firm.

Their representatives have dominated the board of the home loans provider.

Equity directors Peter Munga, David Ansel, Shem Migot-Adholla and Benson Wairegi (the CEO of Britam) sit in the board of Housing Finance.

The NSSF is represented by its chairman, Mr Adan Mohamed. This leaves the firm’s chairperson Steve Mainda as the sole independent director.

This means that Housing Finance will need to recruit two independent directors given that it has opted not to replace some of its board members.

The new regulations on independent directors are aimed at reducing the influence of principal shareholders on the boards as well as safeguard the interests of minority investors whose power in the key decision-making organs has declined.

READ: Banks given 15 months to meet new board rules

Majority of directors in corporate Kenya have secured their seats in boardrooms with the help of business associates, personal contacts or friends.