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Is CBK Opening a ‘can of worms’ by Capping Tenure for Bank CEOs?

David Indeje

Dr. Patrick Njoroge, the Governor of the Central Bank of Kenya (CBK) in many forums he cannot fail to state that ‘We are in the new normal’ as regards to the country’s financial sector.

Key among the new normal is ensuring effective corporate governance in the sector to achieve and maintain public trust and for the functioning of the economy as a whole.
 According to Njoroge, sound corporate governance, by improving market discipline, can send informative signals to supervisors that can speed up and improve the precision of regulatory intervention.
 “The CBK is requiring greater transparency on the part of banks to ensure public confidence. This entails among others ensuring that banks’ financial statements are credible and reflect a true and fair view,” remarks he made from a Stakeholders Workshop on Deposit Insurance.
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However, the most interesting aspect is the regulator’s proposals to limit tenures of auditors, non-executive directors and Chief Executive Officers of banks.

He reiterated the same on Tuesday to the National Assembly’s Trade and Finance Committee and in a media briefing after the bank’s monetary policy Committee meeting that left interest rates unchanged on Monday.

“International best practices are rotating qualified auditors. We do not want to have an auditor according to best practices for more than 3 years. We need a fresh pair of eyes to look into the books that will not lead to complacency. We will need to think about this,” Dr Njoroge told the committee who had sought answers on the Dubai, Chase Bank of Kenya and Imperial bank collapse.

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“We have suggested term limits in the CEO, chairman too. This is because they become comfortable and become ‘professional meeting attendee’ failing to inject new energy into the banks,” he added.

Dr. Patrick Njoroge's brief to the national assembly's trade & finance committee on 26/7/2016 by Central Bank Kenya

Further, during the media briefing he said, “The bank’s executives become too complicit and became part of the institution.”

 “The measure to put in place is to be very clear with the objective. We are going to achieve it,” he said optimistically.

All the initiatives being proposed, the regulator says will add to the new bank ownership, openness, integrity and accountability.

However, this is bound to receive resistance once the proposals are released for review and adopted by the sector.

Currently, most Kenyan bank’s Chief Executive have served for more than three years:

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