By: BRIAN NGUGI
In response to recent developments in the financial sector, the Central Bank of Kenya board chairman, Mr Mohamed Nyaoga, is promising a tougher supervisory regime in the country’s financial sector.
Mr Nyaoga told the Nation that good governance would ensure that the country enhances its position globally as a hub for financial innovation.
“I support the governor’s endeavours to enhance market discipline and supervision. This will not only promote stability of the financial system, but also help the Central Bank to discharge its core mandate of maintaining price stability,” said Mr Nyaoga.
He spoke in the wake of massive fraud, that hit two Kenyan lenders (Dubai Bank and Imperial Bank) prompting the regulator to place them under receivership.
“The actions taken by the Central Bank with respect to the two banks were necessary to safeguard the stability of the banking system and protect depositors.
The Central Bank has already stated that the two banks were placed under receivership due to factors that were unique to them, and that the problems in the two banks are not systemic,” he said.
Mr Nyaoga said going forward, CBK would boost its early warning systems to detect improprieties in the financial sector in order to protect consumers.
“Central banks globally are continuously retooling and enhancing capacity for their staff in order to deal with emerging challenges. Some of these challenges include the increasing sophistication of the operations of the financial sector. In this regard, I support the governor in his strategy to enhance the bank’s effectiveness and efficiency in the delivery of its functions,” said Mr Nyaoga.
CBK has a new governance model where the governor is no longer the chairman of the board.
Mr Nyaoga said the new system would help boost effectiveness of the regulator.
“The Central Bank of Kenya Act clearly demarcates the dos and don’ts for the board. Monetary policy, which is technical is exclusively reserved for the Monetary Policy Committee chaired by the governor.
So practically speaking Central Bank of Kenya has a dual board that is the main board which overseas governance issues and the MPC which focus on monetary policy. There is no case of overlap,” said Mr Nyaoga.
SOURCE: DAILY NATION