As far as legal footing goes, the Central Bank of Kenya (CBK) is a creature of Article 231 of the Constitution.
While its independence and the fact that it cannot take directives from any person or authority in its operations and exercise of power are clear, it is important that its officials are not protected if they indulge in dereliction of duty, incompetence and utter collusion with crooks in the industry they regulate.
It is therefore important that Parliament oversights the CBK within the confines of the law. In the past, CBK officials – mostly acting individually — have engaged in sins of omission or commission.
In the current situation where three banks have collapsed since October, audit trails have found fingerprints of mid and high level CBK officials everywhere.
Individuals, now working in the CBK or who worked there in the recent past, have been named in court papers for complicity in the events leading to the collapse of Dubai and Imperial banks.
Take a miracle
It will probably take a miracle for CBK officials to miss the list of those who helped bring Chase Bank down in the event that a thorough audit of the troubled bank is done. Parliament has now stepped in and launched its own investigations into the serial collapse of Kenyan banks since July last year, whose outcome is expected in 30 days.
The committee, most importantly, will look at the regulatory capacity of the CBK, a matter that has been completely lost in the current hullabaloo.
It must be understood that most of the problems in the industry appertain to parallel banking and, to a lesser extent, conflict over regulation of cultural banking segments. Regular banking legislation was not originally meant to oversee anything beyond its mandate.
The fact is that even when the CBK officials noticed things that were not strictly allowed under the law, we now know they opted look the other way instead of ironing out the problems.
Our view is that to get to the bottom of this rot, Parliament must indeed take its investigations beyond the current crop of CBK officials. They must also summon auditors (internal and external) and people specifically named in forensic and past audits of the fallen banks.
Most importantly, it must craft law that better regulates bank practices, ICT and risk. As they do so, they must come up with a way of blacklisting auditors, ICT suppliers and officials that have messed up the industry.