Publish bank supervision report

There is a key statistical report which the Central Bank of Kenya used to publish annually promptly, but which it these days takes too long to produce and publish.

I am referring to the Annual Bank Supervision Report. I was reminded about the delay in publication of this critical data by last week’s publication of the financial sector stability report. I am not suggesting that the report published in collaboration with other financial sector regulators — the Retirement Benefits Authority, Capital Markets Authority and the Savings and Credit Regulatory Authority last week was not important.

I just happen to hold the view that in delaying production and publication of the annual bank supervision report, the CBK has committed a major omission and lapse. The bank supervision report is so important to be treated in such a lackadaisical manner.

In future, we should insist that all reports and statistics collated by regulatory authorities, especially on areas touching directly their key mandates, must be tabled before the National Assembly.

Why is the bank inspection report important? 

First, we all know that information is the currency of the financial sector. A properly functioning financial system cannot happen without disclosure of full information and statistical data.

Secondly, as depositors and members of the public, the annual bank supervision report is where you get granular details and insight into the financial conditions of specific banks. Information such as asset quality, cost to income ratios and non-performing loans are provided for each bank.

Flight to quality

As a depositor, this report is what gives you the arsenal to exercise the concept known as ‘flight to quality’. Since you can see how the bank is performing, you can move your money from a badly-run bank to a better managed financial institution.

Right now, and because the last report was published in the calendar year of 2018, depositors are flying in the dark.

Admittedly, the CBK regularly puts out voluminous reports with information touching on its other mandates, including monetary policy, inflation, growth, the stability of the financial system and developments in the securities market.

I don’t understand why the regulator cannot publish the annual bank supervision report as promptly. As they produce other reports, one critical aspect of the information you get in the bank supervision report are details on non-performing loans by each bank and by sector. 

This information is critical for planning. Allow me to use an anecdote to explain. Last year, I came across a Dutch NGO that was preparing to extend lines of credit to a commercial bank operating in Western Kenya under an arrangement whereby the non-governmental organisation would lend the commercial bank money to on-lend to farmers at subsidised rates its non-performing loan levels.

Because of the dearth of reliable and updated data on non-performing loans for specific commercial banks, that transaction could not progress. The lender was not willing to expose itself before seeing updated numbers and data.

Yet the most important source of truth when it comes to data on non-performing loans by the name of the bank is the annual bank supervision report. Indeed, most other publications and reports by the CBK only provide aggregate numbers without names of specific banks.

Whichever way you look at it, the fact that publication of the crucial report has been so inordinately delayed is a major blot on the part of the bank supervision department of the CBK.

Unemployment rate

It is a big issue because production and publication of regular and accurate information on the financial sector is one of the key roles of the CBK, especially when it comes to its mandate of maintaining a safe and sound financial system.

Which brings me to the issue of the quality of national statistics. The CBK is not alone when it comes to delays in disseminating statistics. The Kenya National Bureau of Statistics itself has been a culprit. For a long time, surveys were conducted but not analysed.

The ‘Economic Survey’ and the ‘Statistical Abstract’ — the two most important publications from the bureau — are disseminated as if they have no release calendars. While the ‘Economic Survey’ is still produced regularly, most of the stuff it contains is outdated. The last ‘Statistical Abstract’ was published in 2012. 

Key statistical reports that the bureau used to produce, including the ‘Statistical Digest’, the ‘Annual Trade Statistics’ and the ‘Annual Education Statistics’ are produced intermittently. Even though the bureau produces a quarterly labour force report, it is difficult to discern the accuracy of their unemployment numbers especially how the compute informal sector employment data.

Comprehensive labour market surveys are few and far between. So when you ask about the unemployment rate in Kenya, you are likely to be given a number that means little, is old, or both. We need to treat statistics seriously.