CBK boss digs into Treasury’s planned law

A rift is brewing between the Central Bank of Kenya (CBK) and the National Treasury over the latter’s move to create a regulatory body to duplicate its role in monitoring banks.

This drift in relations stems from the planned Financial Market Conduct Bill which the banking regulator insists, if passed, could undermine its mandate.

While admitting his surprise, Central Bank governor Patrick Njoroge said the regulator risks becoming a subordinate to the financial markets conduct authority by having its powers in approving bank fees and charges to customers and mandate in dealing with reckless lending by banks stripped.

And it is perhaps this duplication of roles and transfer of powers that had Dr Njoroge hot under the collar, stressing the bill was an attack on the Central Bank.

“This is the financial sector equivalent of being asked to trade in your well serviced SUV for a ‘souped’ up Subaru. It may have flashy lights, a stabilizer at the back, noisy exhaust but it is still a Subaru. This is not time for hubris, it’s time for action. Make no mistake, CBK is under attack,” Dr Njoroge said during a briefing on Tuesday.

The bill sets to create the Financial Markets Conduct Authority which among other things will  set the maximum rate of interest a lender can charge.

This is a departure from the current push by the Central Bank to have the existing interest rate cap law repealed.

“This bill does not deal with the interest rates caps issue and does not deal with the fundamental issues that led to the interest rates caps,” he said.

Dr Njoroge said he had had meetings with Treasury officials but had been given no indication of the planned bill.

The tough talking governor read mischief with the proposed law adding that the drafter were not comfortable with the reforms he is instituting in Kenya’s financial services sector.

“I have been warned in various ways about certain parties that lie in wait poised for mischief, but that our actions have consequences, after all this is Kenya. We are ready for that, that menace will find us at our post and unafraid,” he said.

Additional reporting by Sophie Kinoti