CBK’s team of inspectors a drop in the banking ocean

Central Bank of Kenya (CBK) building in Nairobi on March 8, 2017. FILE PHOTO | NMG 

By EDITORIAL

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A few months ago, when three commercial banks—Chase, Dubai and Imperial — collapsed at close intervals, the die was cast.

Kenyans asked the regulator, the Central Bank of Kenya (CBK), not only to tighten its regime but also increase its supervisory staff. This was after investigations revealed that lax regulation had paved
the way for the financial mess that later rocked these institutions.

The banking industry itself acknowledged that nothing short of uncompromised regulation could prevent or cure the sort of mess that nearly ruined its image last year.

That the CBK has recruited only 15 on-site inspectors since the collapse of the three institutions doesn’t paint a good picture of a regulator with a compelling desire to get rid of unorthodox practices that hang dangerously over the industry.

With 44 active banks, the number of inspectors hired so far amounts to nothing more than a red-herring.

In fact, given the volume of transactions banks handle through mobile phones, and manual platforms, the 15 new inspectors together could hardly interrogate one large bank in a useful manner.

That is why the CBK must move with speed to match its words with action.

First, it must review its regulatory procedures and standards to make unethical behaviour the most expensive undertaking in the banking.

Second, it must recruit adequate supervisory staff to ensure that the strict rules are observed at all times.

And lastly, it must turn its attention to its staff and rid its ranks of those conspiring with errant bankers to fleece depositors. 

It is encouraging that the CBK has once again indicated its intention to hire additional enforcement employees.

On Wednesday, it invited applications for a number of positions, including information systems auditors, general operations auditors and risk officers.

But this must not remain a plan forever. Time for expressing good intention is over. It is execution time. The recruitment must be concluded urgently to attain a critical mass of experts needed to strengthen the CBK’s regulatory capacity. Anything short of that is another public relations drive.