Proposed law allows President to appoint CBK chair
Central Bank of Kenya governor, Njuguna Ndung’u. The new law will see the bank’s governor lose the chairmanship of CBK. Photo/FILE
What you need to know:
- The new law will see the bank’s governor lose the chairmanship of the Central Bank of Kenya
The president will be the appointing authority of the new chairperson of the Central Bank of Kenya board if Parliament approves amendments to laws governing the banking sector regulator.
The new law will see the bank’s governor lose the chairmanship of the Central Bank of Kenya (CBK) in what is expected to boost corporate governance and reduce instances where the governor chaired the board and assessed his own performance.
Funded by taxpayer
According to an amendment to the Central Bank of Kenya Act before Parliament, the new office of the chairman will be funded by the taxpayer.
“The object of this Bill is to amend the Central Bank of Kenya Act to provide the procedure for appointment of the chairperson of the board and set out the working relationship with the governor and deputy governor,” said Finance minister Njeru Githae in a special Kenya Gazette supplement tabled in Parliament on Wednesday.
Parliament will, however, have powers to approve the individual appointed by the Head of State before assuming office.
The chairman will hold the office for four years, similar to the tenure of the governor. The president will also retain powers to appoint the CBK governor, subject to parliamentary approval.
The amendment proposes to increase the number of non-executive directors by three to 11.
Administrative challenges
The governor has traditionally been the chief executive as well as the chairman, raising administrative challenges.
The governor also served as the chairman of the Monetary Policy Committee.
Parliament amended the Finance Bill 2011 to trim the powers of the governor by creating the position of an independent chairperson.
Currently, CBK has an eight-member non-executive board of directors comprising the governor, his deputy, Treasury permanent secretary and five others.
The need for a change in the law was inspired by last year’s events in the money markets that saw a sharp depreciation of the Kenyan shilling against major world currency.
The governor’s performance in dealing with the slide was put in question, as was the fact that there was no independent board to review his performance.
