Proposed law to whip rogue banks as CBK celebrates golden jubilee

The Central Bank of Kenya Governor Patrick Njoroge (left) and National Treasury CS Henry Rotich at the launch of CBK's golden jubilee celebrations on September 25, 2015. The Cabinet has approved new CBK Bill 2015. PHOTO |SALATON NJAU | NATION MEDIA GROUP 

In Summary

• Proposed Central Bank of Kenya Bill 2014 is now set for debate in Parliament
• Treasury CS says the legislation will establish proper governance structures for the CBK including a clear separation of functions between its board and management, with the former responsible for policy setting and oversight, and the latter responsible for policy implementation.
• Rotich: One of the activities for the CBK@50 celebrations is the preparation for the launching of the new currency (as provided in the Constitution

By BRIAN NGUGI
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Central Bank of Kenya (CBK) will get more teeth to crack whip on rogue banks with new Bill as it launches its golden jubilee celebrations which will climax next year when it turns fifty.

National Treasury Cabinet Secretary Henry Rotich said on Friday during the CBK@50 launch that the proposed law, approved by the Cabinet last week, will enable the regulator play a more proactive role in the country’s financial sector.

NEW CBK BILL

“I am glad we have worked closely with the bank to develop a new Central Bank of Kenya Bill 2015, which was passed by the Cabinet about a week ago. The Bill seeks to bring on board best international practice and recent developments in central banking law,” said Rotich.

He noted the proposed law which is now set for debate in Parliament would clearly define and reinforce the primary role of the bank.

“It will also provide for an effective autonomous Monetary Policy Committee (MPC) with provisions for its operation consistent with a framework of instrument autonomy while providing for accountability and transparency of its decisions,” he said.

Further, the Treasury CS  said the legislation will establish proper governance structures for the regulator including a clear separation of functions between its board and management, with the former responsible for policy setting and oversight, and the latter responsible for policy implementation.

“The Bill provides for the appropriate board and management composition for efficient and effective decision-making and operations,” Rotich added.

CBK AUTONOMY

He said the Bill provides clear financial provisions that are critical to entrenching autonomy.

They include provisions on capital, reserves, budgeting, profit allocation, and a re-capitalization framework for the Bank that will see its paid up capital increase from Sh5 billion to Sh20 billion over the next three years.

“Apart from the CBK Bill, the National Treasury is consulting with key stakeholders, on reforming the financial sector supervision framework. This may include eventually move to a “twin peaks” model where all market conduct supervision, including for banks, would be under the Financial Services Authority and all prudential supervision, including for non-banks, would be under the CBK,” he said.

“We expect that one of the activities for the CBK@50 is the preparation for the launching of the new currency (as provided in the Constitution), just like founding President Jomo Kenyatta did on September 14, 1966 when he launched the new Kenyan currency and the CBK opened its doors,” he said.

CBK GOVERNOR

CBK Governor Patrick Njoroge, on his part said going forward the regulator would lay emphasis on further deepening of the financial markets, greater supervisory vigilance, increased market discipline, smarter regulation, inclusive banking through payment systems innovations, increased policy coordination with fellow central banks and regulators as well as a review of monetary policy frameworks.

“Notably, the Central Bank will endeavour to promote transparency in credit pricing and improve the monetary policy transmission to the real sector,” he said.