Weak banks a risk to Kenya’s economy, says CBK deputy governor

Strong financial institutions are good for the growth of the country, Central Bank of Kenya Deputy Governor Sheila M’Mbijiwe has said.

Speaking at a conference of the Institute of Certified Public Secretaries of Kenya (ICPSK) at the Sarova Whitesands Beach Resort in Mombasa, Ms M’Mbijiwe noted that weak banks were a risk to the economy.

“What I want is strong banks. We have to reinforce and strengthen the financial sector.

“We need strong and vibrant banks. They are very good for development and the future of Kenya,” Ms M’Mbijiwe said.

Ms M’Mbijiwe added that with a stronger financial sector, depositors’ money would also be safe.

She said the banking sector needs to be structured in a way that it will help the country achieve its economic ambitions.

“The banking system should be structured to support the growth of Kenya.

Ms M’Mbijiwe added that in Kenya, two banks had been placed under receivership and one is under liquidation.

CORPORATE GOVERNANCE

She noted that corporate governance and poor liquidity risk management are signs of a problem within the banking sector.

She said that if banks do not manage this well, it may lead to liquidity problems at the institutions.

Corporate governance, she said, is a particular concern of the Central Bank.

“We do not concern ourselves with individual institutions but with the stability of the whole financial sector,” she said.

When we see banks that have destabilised the financial sector, our immediate concern is the depositor. That is when our protection has to come in,” she told the delegates.

POOR RISK MANAGEMENT

“Corporate governance and poor risk liquidity management are some of the factors that have led to the closure of banks in the country.

“These affect [the] institutions’ management and if you don’t have the right structure, you get into problems,” she said.

She urged delegates to embrace challenges within the sector and find solutions to them.

“If you are not facing challenges, it means you are not growing. It is not about the challenge but how you recognise and deal with it,” she said.

On the issue of capping interest rates, Ms M’Mbijiwe said the banks had made their offer and the matter was now for President Uhuru Kenyatta to decide.

“The Central Bank is not the owner of interest rates or bank charges. We are a regulator. Our job is [to ensure] stability of the financial sector and the growth of the economy,” she said.