Former CBK boss Ndung’u faces probe over banking crisis

Former Central Bank of Kenya governor, Prof Njuguna Ndung’u. PHOTO | FILE 

By EDWIN MUTAI, emutai@ke.nationmedia.com
Posted  Tuesday, April 12   2016 at  23:00

Parliament Tuesday turned its guns on the past Central Bank of Kenya leadership with a demand that it should be investigated in the wake of massive fraud, poor governance and weak oversight that has seen three banks collapse in nine months.

The demand came after National Assembly Speaker Justin Muturi ordered the Finance, Trade and Planning Committee to investigate the recent closure of banks and report to the House in 30 days.

Mr Muturi was responding to Leader of Majority Aden Duale’s request for a parliamentary investigation into the activities of Dubai, Imperial and Chase Bank directors that have caused the lenders to go into receivership or statutory management within a year of regime change at the CBK.

Mr Duale said recent events had demonstrated that the closure of  banks had a lot to do with the past Central Bank of Kenya leadership, which should be made to account.

“The committee must investigate the regulatory issues that rendered the CBK incapable of intervening before the banks collapsed. The committee must also come up with amendments to the deposit protection fund and how to better safeguard depositors,” he said.

Investigating the past Central Bank of Kenya (CBK) regime effectively puts the tenure of Prof Njuguna Ndung’u, who left office in March last year, under the spotlight – a move that may pull him back to the public limelight.

Mr Duale, supported by members from both sides of the House, demanded that the scope of the committee’s work extends to determining the role that the CBK’s bank inspection department, the auditors and directors played in the loss of billions of depositor funds causing the current crisis.

MPs called for stiffer penalties against corporate thieves, arguing that without strong deterrence the country is unlikely to get out of the circle of looting in both public and private sectors.

“We should think of death sentence for people who collect people’s money and run away with it,” Seme MP James Nyikal said.

The CBK last Thursday placed Chase Bank in receivership locking out thousands of depositors from accessing their money.

The shutdowns have mostly affected small savers, including farmers and small businesses, with the deposits in the troubled banks causing a general flight from small banks.

The investigations come barely six months after National Assembly’s Public Investment Committee (PIC) investigated National Bank following reports that it had disposed of 12 prime properties and declared the proceeds as profits.

The committee chaired by Eldas MP Adan Keynan is yet to submit a report.

While granting Mr Duale’s request, Mr Muturi asked the committee to investigate all problems facing the financial sector, including corporate governance.