Bankers to kick out errant members
What you need to know:
- The clearing house transfers money between the members, which helps them to transact business and get liquidity support whenever they require credit.
- The KBA’s self-regulation will also punish actions that bring industry-wide problems, including comments that may lead to a loss of confidence in the sector.
- Last year, President Uhuru Kenyatta endorsed the code as a key intervention towards addressing corruption and unethical practices within the government.
The Kenya Bankers Association (KBA) will begin expelling errant members from the clearing house in June once its self-regulatory framework is approved.
KBA chief executive officer Habil Olaka told the Nation that the framework would remove such members from the elite club, effectively locking them out.
The clearing house transfers money between the members, which helps them to transact business and get liquidity support whenever they require credit.
Some banks have recently been caught up in revelations of insider lending, corrupt dealings and the cooking of books in what is a worrying trend of corporate governance issues, lack of transparency and accountability.
“Given what has evolved in the market and given what kind of anxiety that has been created, and essentially pointing out that there could be areas of corporate governance issues, transparency and accountability, we need to see how we can reinforce the system and what role the KBA can play,” Mr Olaka said.
He said KBA wanted to prepare its members to adhere to the set standards and the critical thing was that the regulation should be enforceable and not depend on “moral persuasion”.
The KBA’s self-regulation will also punish actions that bring industry-wide problems, including comments that may lead to a loss of confidence in the sector.
Expulsion will be even more punitive given that the inter-bank exchange is already fraught with suspicion that has seen banks reduce lending to each other forcing the Central Bank of Kenya (CBK) to intervene.
According to the latest CBK data, the number of deals between banks fell to an average of eight in the wake of the collapse of Chase Bank from an average of 22 the previous week.
The value of money exchanged between banks fell from Sh19 billion in the week ending March 30, to Sh9 billion the week ending April 6, and only Sh5 billion last week.
KBA also signed a Code of Ethics for Business in Kenya, developed on behalf of the private sector by the Kenya Private Sector Alliance (KEPSA), Global Compact Network Kenya, and Kenya Association of Manufacturers (KAM).
Last year, President Uhuru Kenyatta endorsed the code as a key intervention towards addressing corruption and unethical practices within the government.
