What you need to know:
- Some MPs asked the House to pass laws imposing death sentence on those who commit economic crimes, others described the insider lending by banks that have gone under receivership as outright theft while others talked of their encounters with depositors whose money is stuck in the shut banks.
- Majority Leader Aden Duale kicked off debate on the matter with a request to the Speaker to have the Public Investments Committee to look into National Bank, in which the government has a significant share.
- Seme MP James Nyikal decried the House’s decision to decline a proposal by Kiharu MP Irungu Kang’ata to impose the death sentence on economic criminals under the Ethics and Anti-Corruption Commission Act.
A committee of members of Parliament will investigate four troubled banks and the auditors charged with scrutinising their books of account.
They will also examine the role of the Central Bank of Kenya in supervising the financial sector and why it failed to detect problems at those banks early enough.
National Assembly Speaker Justin Muturi ordered the Finance, Trade and Planning Committee to look into the affairs of the banks and prepare its report in 30 days.
The committee will make recommendations to change the law to protect depositors and banks from the illegal activities of rogue managers and shareholders.
Some MPs, furious at the suffering caused by the failure of banks, wanted certain economic crimes reclassified as capital offences punishable by death.
Members were expressing their anger at the collapse of Dubai, Imperial and Chase banks since August last year amid claims of shady insider lending. And recently, senior managers at National Bank of Kenya were suspended and ordered to report to police investigating their management.
Opposition MPs described the shutdown of three banks since August last year as symptomatic of corruption in Kenya, which they said has increased under the watch of the Jubilee administration.
Central Bank governor Patrick Njoroge was singled out for praise for the manner in which he has clamped down on banks whose heads have been involved in improprieties, but, the MPs insisted that he too must be questioned.
Mr Muturi said the Finance, Trade and Planning Committee should report its findings to the rest of the House in 30 days.
It will look into the affairs of National Bank, Chase Bank, the auditors who failed to point out the issues in the banks in the past and the role of the Central Bank.
Also likely to face questions is former Central Bank governor Njuguna Ndung’u. Prof Ndung’u has been criticised because under his leadership, the Central Bank appeared not to have supervised banks adequately, allowing them to get away with improprieties.
Majority Leader Aden Duale kicked off debate on the matter with a request to the Speaker to have the Public Investments Committee to look into National Bank, in which the government has a significant share.
“Today, there are Kenyans who can’t put food on their table because one director at Chase Bank, through insider lending, took Sh1 billion unsecured,” said Mr Duale.
“Even as we sit here, those of us who bank with the other banks, how sure are we that the salaries you send every month, however little it is, to Cooperative Bank, to Barclays Bank…all these banks, that it is safe?” he asked.
He asked the committee to look into banks’ liquidity, corporate governance at Chase, Imperial and Dubai banks and the leadership of the Central Bank and why it failed to detect the issues before they happened.
Mr Duale also asked the committee to ask why the Central Bank still has no board of directors.
“The Committee of Finance and Planning should leave whatever else it is doing. You need to invite the Central Bank of Kenya to speak to the people’s representatives, not through the media, to call the directors to speak to the people’s representatives,” he added.
The committee was also asked to come up with whatever amendments to the Banking Act — needed to further protect small depositors.
Mr Duale was supported by all the MPs.
Although the authorities are slow to implement recommendations of parliamentary committees, the hearings help expose to the public how institutions work and in some cases how those trusted by the public abuse their power.
Ainabkoi MP Samuel Chepkong’a asked the committee to come up with a way to have depositors access at least Sh50,000 when a bank goes under.
“I get very surprised when I hear the governor of the Central Bank says that there was insider trading. When people steal money and they are in government, it is called corruption.
When people steal our money in Chase Bank, they call it insider trading. Stealing and corruption are the same thing, whether in the public or private sector. We should call a spade a spade,” he said.
He said that from the information already in the public, it is already evident that the directors at Chase Bank who borrowed more than the bank’s core capital should be in remand awaiting trial.
Mr John Mbadi (Suba, ODM) said investigations should focus on the Central Bank, which regulates the sector, as it appeared to have failed in its supervisory role, as well as the auditors who scrutinize their accounts.
“I think the important question we need to ask the role of CBK is what is hindering it from doing its duty? Is it the legal framework, is it the personnel or is it corruption?” he asked.
Mr Mbadi said the banking sector “has started borrowing from the bad habits of the Jubilee Coalition” and are stealing in the same way that public servants have been taking taxpayers’ money.
Mr Humphrey Njuguna (Gatanga, Narc) described the financial sector as a thermometer for the economic performance of a country and described previous crises as indicators of the tough times Kenya was going through at the time.
Mr Njuguna said the shutdown of Imperial Bank, ranked 17th and Chase Bank ranked 11th was a serious matter that should have Kenyans worried because of the damage caused to the economy.
He said scrutiny should be on CBK.
“Once a bank is licensed, you don’t have to go asking for an audit. The licence from the Central Bank is enough. So someone is sleeping on the job and we would want to know the truth,” he added.
Mr Manson Nyamweya (Mugirango South, ODM) asked Parliament to be decisive.
“We are using very nice words like inside borrowing. There is nothing like inside borrowing. That is outright theft. People have taken depositors’ money and they are walking free. Because they have money, they will hire the lawyers, they will hire justice, they will hire the system and walk free,” he added.
Nambale MP Sakwa Bunyasi praised CBK governor Dr Njoroge, whose appointment he described as “one of the best things that happened in this country.”
“People might think it might be six or eight months and what did he do about it then but the current things are happening because the current governor could not let the bad things happen,” said Mr Bunyasi.
Tongaren MP Eseli Simiyu criticised his colleagues, saying the National Assembly also appeared to have been asleep as the issues at the National Bank had been reported before.
“The rest of the country has gone rogue and this is just a reflection. Financial impropriety has permeated every part of this nation and in the financial sector, it was going to happen,” he added.
Dr Simiyu argued that the bankers who took the money would easily have done it because they knew a lot of the money being banked with them was stolen money.
He said the Central Bank governor had done well by showing where the rot is and what action should be taken.
The Tongaren MP said the auditors have in the past been cited in reports of the PIC as “helping cook the books.”
Seme MP James Nyikal decried the House’s decision to decline a proposal by Kiharu MP Irungu Kang’ata to impose the death sentence on economic criminals under the Ethics and Anti-Corruption Commission Act.
“We must start thinking of death sentence for people who collect people’s money and then they go. We are talking of nice laws and we know these people. One day we must bring death sentence for some types of economic crimes,” he added.