Njoroge is tops on character, it’s now time to tighten money bolts

Dr Patrick Njoroge, who has just been reappointed to serve as Governor of the Central Bank of Kenya for another four-year term, is a man devoid of ego and instinctively averse to self-advertisement.

His tenure at the CBK is an engaging story about the impact of personality in an office.

Indeed, the main reason his reign has captured the imagination of the public is not what he achieved on the monetary policy front — such as low and steady inflation, stable exchange rate or relative stability of the banking. It is about integrity and character in public leadership.

Many did not agree with him when, at his parliamentary nomination hearings, he spoke against policy-led consolidation of banks and for market-led reforms.

His critics may have had the laugh after the government recently ordered Kenya Commercial Bank (KCB) to merge with the troubled National Bank of Kenya. The merger of the State-owned banks arose out of government policy.

INTEREST CAP

Then there was this time when a number of experts disagreed following the approval by Parliament of the interest rate capping law in 2015.

Governor Njoroge chose the policy rate (the Central Bank Rate) instead of the Kenya Bankers Reference (KBRR) as the basis for calculating the cap.

The collapse of three banks in a row — Dubai Bank, Imperial Bank and Chase Bank — also presented a major challenge to his stewardship, with critics charging that the Central Bank had displayed little capacity in managing and resolving such crises.

It was argued that, while Dr Njoroge’s regime had always scored highly on conduct of monetary policy, it had not done a good job at managing problem banks and protecting the depositors’ interests.

Last year, he sent shock waves through the banking industry by suggesting criminal proceedings against CEOs of banks that failed to report suspicious transactions relating to scandals like the National Youth Service ones.

INTEGRITY

Nonetheless, while one can dispute the substance of some of the moves and decisions Dr Njoroge has made, he earns plaudits for making a big impact in an area where Kenya has the biggest deficit — integrity in leadership.

It is the character he brought into public leadership and management of the nerve centre of the country’s financial system that has earned him public admiration and trust.

Dr Njoroge stands out. His style and integrity brings freshness when viewed against a backdrop where public life and leadership is dominated by self-absorbed elites engaged in blind pursuit of corruptly acquired wealth and opulent lifestyles.

Indeed, our leadership values have degenerated to levels where, while it needs no courage to do the wrong thing, it needs a lot more courage to do the right thing.

I have suggestions for Dr Njoroge as he commences his last term in office.

MONEY LAUNDERING

First, can we have a little more transparency in the operations of the Monetary Policy Committee (MPC)?

Best practice in other jurisdictions is that the MPC publishes its minutes on a public website. We want to know the inflation hawks and the doves in this committee.

Secondly, let him look into the policing of the financial sector. Can we see a CBK-led crackdown on money laundering?

Can the CBK liaise with the National Treasury to strengthen the Financial Reporting Centre (FRC) and to give the data capability and capacity to flag suspicious transactions in near-real time?

Even more urgent, what are we doing to strengthen oversight and control over the mobile financial market infrastructure?

During the terror attack on Dusit2 Hotel, we saw how vulnerable our systems still are to money laundering by terrorists.

CONTROL

I say all this knowing the remit of the CBK is just too wide and needs to be reduced.

It prints currency, licenses and supervises banks, manages and issues government securities, is in charge of monetary policy, owns the School of Monetary Studies and is — albeit indirectly — the power behind the Kenya Deposit Insurance Corporation (KDIC) and the FRC.

On paper, KDIC and FRC are agencies of the National Treasury — entities with their own boards and which run independently of the Central Bank.

But the fact of the matter is that, in terms of effective power, the CBK is in charge of these institutions.

Indeed, most of the staff at these institutions are employees of the Central Bank. They run on resources provided by the CBK.

When you give your Central Bank too many responsibilities, it is bound to find itself conflicted — for instance, having to continue borrowing from the market when monetary policy is pointing to a tightening of the stance.

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