CBK should randomly audit banks

The Central Bank of Kenya./MONICAH MWANGI
The Central Bank of Kenya./MONICAH MWANGI

A colleague once told me his encounter with the Nigerian banking mini-crisis that saw the then governor of the Central Bank of Nigeria, Lamido Sanusi, fire the CEOs of five big banks. 

These banks had been permanently locked into the CBN’s discount window borrowing money to meet daily obligations when in fact they should have been net givers of liquidity to the system.

My colleague had provided professional services to one of these banks and after invoicing and chasing payment for close to two years, he decided to fly to Nigeria and meet with the CEO personally to pursue the matter.

He met him.

But not in the circumstances he envisaged.

Just as he was coming into the lobby, he was met with a commotion and the sight of the said CEO in handcuff s being led out of the building by police officers.

He was among the five bosses that Governor Sanusi had fired and ordered arrested.

Some went on to serve jail terms for messing around with people’s money.

This now needs to happen in Kenya. 

This week saw the suspension of six senior managers of National Bank of Kenya including the MD to pave way for an audit. 

This is after the bank plunged into a loss just one quarter after telling the market it had made profits of Sh2.5billion in the nine months to end of September 2015. 

The reason given was that the non-performing loans had risen exponentially.

Watchers believe the Central Bank of Kenya under the new governor Patrick Njoroge insisted on a more realistic provisioning for bad loans by NBK sending it into loss territory.

It is mind boggling how casually institutions in this country are playing fast and loose with people’s money and covering it all up with PR statements and advertisement campaigns.

This National Bank was at the tail end of last year trumpeting that it had delivered its best financial performance in its 48 year history.

Should this turn out not be true, it will become yet another scheme to defraud Kenyans. 

This is a bank that has been seeking to do a rights issue of Sh10billion.

Twice in the past, retailer Uchumi has come to the market to raise cash in a rights issue only to go down soon after.

Both times it had paraded sterling financial performance numbers.

 The fact that a number of banks have shown sharp increases in bad loans shows that CBK is beginning to demand proper financial reporting.

It also exposes under performance by the previous administration in proper supervision of the banking sector.

Going forward, the governor should investigate his own house to establish which of his officers dealt with these banks.

Mbugua is a communication consultant and comments on topical issues.