Bankers say sector stable despite institutions’ credibility questions

The banking sector is sound and robust; this is according to the Kenya Bankers Association CEO Habil Olaka.

Speaking on Citizen TV’s Business Center on Wednesday night, Olaka noted that there were isolated cases in which banks had reportedly cooked books as they chase profit.

“If you look at Chase Bank, even though the details have not merged, it was a statement of numbers. The Managing Director and Chairman seemed to have been involved and they stepped down. It is something that happened within an institution and not in the whole sector,” stated Olaka.

According to Benson Okundi, a partner at the Price WaterHouseCoopers (PWC), there are loopholes that are brought about by pressure in the sector.

“There is pressure to perform and show good numbers. The bulk lies in corporate governance. If we are able to instil good corporate governance in the business sector, then we will be able to see these cases going down,” said Okundi.

But is the banking sector safe?

” Part of the information that has been going round is not true. Banks should try their best to communicate the right information. You need to get the correct information before panic sets in,” said Olaka.

” We have seen significant development in guidelines issued by the CBK. It is now a question of implementation of the said guidelines. There is currently a strict rule that stipulates Directors of the Banks must be independent, they should not be shareholders,” said Okundi.

Okundi said that because of developments in the banking sector, the Central Bank of Kenya (CBK) must be enhanced.

“When the CBK governor was appointed, he said he would strengthen the supervision department of the banks. The results are clear. Banks are put on alert to ensure they follow the law. The CBK has the moral authority to talk about the banking sector ,” said Olaka.

According to Okundi, there needs to be an ethical conduct of business.

“Beginning 2018, we will see more sanity in that area. It is important to consolidate the sector and a move to merge the smaller banks is a step in the right direction,” said Okundi.

“The challenge is to have more players for us to achieve financial inclusion even in rural areas,” noted Olaka.

The raising concerns in the banking sector come as Chase Bank Chairman Zafrullah Khan and Group Managing Director Duncan Kabui resigned with immediate effect.

Their resignation came on the day the bank restated its financial results, posting a 686.4 million shillings loss.

The bank’s financial performance raised concern over the credibility of its books having reported a 2.3 billion shillings profit in 2014.

The restated financials showed that the bank had understated its conditional liabilities which stood at 26.6 billion shillings as opposed to 13.2 billion shillings it had earlier published..

The CBK is keen to protect the financial system, with credit risk becoming a growing concern.