The Central Bank of Kenya (CBK) has launched fresh vetting for directors of banking institutions and senior managers to weed out people with questionable integrity or conflict of interest.
CBK chairman Mohamed Nyaoga said the re-vetting has been necessitated by recent bank failures that threatened to crush investor confidence in Kenya’s banking system.
Nyaoga said fresh vetting, backed with the strengthening of banks’ corporate governance structures, would ensure that those holding the board and management positions play their roles effectively.
He said this yesterday when he opened the Centre for Corporate Governance (CCG) Alumni Grand Reunion at a hotel in Nairobi.
“Most of the banking problems we have had in the recent past were related to weak corporate governance, perpetuated through internal fraud,” he said.
“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.
The most recent bank failures include Dubai Bank, Chase Bank and Imperial Bank. Chase Bank was revived almost immediately while Imperial Bank, where Sh42 billion was lost, is still under receivership.
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 organisations.
“We must see the impact of corporate governance beyond boardrooms into the societal, national and international arena,” Dr Joshua Okumbe, the chief executive of CCG, said.
He 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 said 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.
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, the integrity of information and disclosure requirements.