Senators have asked the Director of Criminal Investigations to question Central Bank of Kenya governor Patrick Njoroge and senior officials under him tasked with monitoring commercial banks saying it was not enough to only target directors of collapsed lenders and let the regulator free.
The lawmakers on Monday said customers of Chase Bank and two others that have gone under in the last 12 months deserved to be told what action Central Bank took before putting them under receivership and whether its officials were involved in financial malpractices that contributed to their collapse.
The Senate Finance Committee members claimed that CBK officials could have connived with directors of the collapsed banks to swindle depositors’ hard-earned cash before the institutions went down.
The House team, chaired by Mandera Senator Billow Kerrow, held a press conference Monday at County Hall, Nairobi where they also blamed Dr Njoroge for not rehabilitating struggling banks and instead closing them.
HASTY CLOSING OF BANKS
“CBK does inspections regularly, sometimes monthly. It is difficult for Kenyans to imagine all these irregularities were going on without the connivance or knowledge of the regulator.
“Inasmuch as the directors of these banks are culpable for failing to fulfil their fiduciary responsibilities, we feel the governor has acted in a hasty and irrational manner in closing the banks. There must be a more rational way to handle this situation,” said Mr Kerrow.
Although they welcomed the setting up of a fund to bail out banks facing liquidity pressure owing to panic withdrawals, they said it had come late and that CBK, as the bank of last resort, should have had a system of cushioning financial institutions from anxiety in the sector.
On Sunday, Dr Njoroge said they had set up the fund in a bid to calm down the market following fresh rumours that some other mid-tier lenders were to be closed after Chase Bank.
“The governor should not use a bazooka to kill a fly. He is overreacting. The main concern should be on depositors. Thousands are now suffering in the streets.
“CBK should be equally held responsible. We must see action being taken against CBK officials who were in charge of these commercial banks,” said Nyeri Senator Mutahi Kagwe.
Last week, Dr Njoroge cited social media as having driven down Chase Bank after messages were circulated on Facebook and Twitter about its imminent collapse.
Imperial and Dubai Banks went down earlier.
However, the senators said that the regulator was deflecting attention from themselves after failing to act early enough before panic withdrawals.
“It is the first time the CBK is blaming the social media instead of themselves on this matter. It is not enough to question directors of the banks. There are people at CBK who slept on their job. We want to see action taken against them,” said Makueni Senator Mutula Kilonzo Jr.
They also said the plight of customers was not considered when the banks were closed saying most were now suffering and did not know what to do after losing millions in deposits.
“The banks were given a clean bill of health by Central Bank just a few weeks before collapsing. How can that happen?
“If you have not done your job as required then you should tell us why and we should be told if there are cartels at Central Bank protecting these commercial banks,” said Nominated Senator Beatrice Elachi.
Source: All Africa