BY JAMES MULIRO Commercial and microfinance banks should brace themselves for increased scrutiny and supervision by the Central Bank of Kenya (CBK). This follows a decision by the sector regulator to hire a team of professionals to ramp up its oversight role in the industry, which developed deep cracks in 2015. The Central Bank’s actions follow the laxity in the supervision of banks and financial entities it regulates during the tenure of former governor, Professor Njuguna Ndung’u. Soon after Prof Ndung’u retired from the CBK, two banks were put under statutory management for flouting regulatory rules and for unsafe and unsound business practices. To tighten the loose ends in the supervision arm, the CBK has moved to hire two information systems auditors, five bank examiners/analysts and three senior bank examiners/senior analysts. Among the key mandates of these roles would be to conduct on-site and off-site examination of banks and non-banks licensed and regulated by the CBK, assess reliability and integrity of financial and core banking systems and lead teams in conducting on-site and off-site examination of these institutions. The decision to make the new hires comes just a few weeks after CBK Governor Dr. Patrick Njoroge, in December 2015, said that 2016 would be a year of “transition when we shall more aggressively to supervise banks”. According to the regulator, such roles require highly analytical personnel with the “ability to challenge status quo based on quantitative facts and impacts”, coming at a time when banks, especially the small ones are facing major capital inadequacy risks that have dented their credibility in the eyes of customers. Given the recent happenings in Kenya’s banking industry, the CBK declared a freeze on licensing of new banks as from November 2015 for an unforeseeable period. When Dr. Njoroge officially assumed the role of CBK Governor in July 2015, he hit the ground running, earning the affection of many people across the geographical and political divide. He is a no nonsense sheriff who does not seem to take sloppiness in the banking sector circles lying down like his predecessor. In the perspectives of critics, Dr. Njoroge’s short stint at the helm of CBK rapidly made Prof. Ndung’u ‘look bad’ for the ‘many sins’ he is accused of, either by commission or omission, while he was the sector’s boss for eight years. In August 2015, Dr. Njoroge put Dubai Bank of Kenya Limited under receivership. This was followed with a directive to wind up the bank, which was accused of engaging in fraudulent activities. Later in October 2015, he cracked the whip on Imperial Bank of Kenya Limited. The mystery at Imperial Bank has, however continued to heighten as only a fifth of its depositors have turned out to claim their funds. Only 21% of an estimated 50,000 depositors turned up to claim their funds about a month after the CBK said it would avail Sh8 billion for the claims. Approximately 10,600 claimants lodged claims for refunds that would be made through Kenya Commercial Bank and Diamond Trust Bank. The poor depositor turnout was comparable to the one at the collapsed Dubai Bank of Kenya. In Dubai Bank’s case, just 561 out of an estimated 7,700 depositors made claims on CBK’s offer to refund deposits not exceeding Sh100, 000. Such turn of events continue to raise questions of integrity in the banking industry in Kenya, with some analysts claiming they could perhaps have been used as conduits for money laundering. In Imperial Bank’s case, about 44,500 depositors were expected to come forward to make claims of their deposits. Given the low turnout, approximately 34,000 of these customers are yet to make the claims evoking tough questions regarding who the real people these accounts belong to. About 5,700 customers with depositors amounting to over Sh1 million will wait for much longer to claim their money and it is highly likely that the mystery will not end there. Meanwhile, Imperial Bank borrowers are expected to continue servicing their loans even after the lender’s shareholders failed to offer a firm proposal that would have allowed the prompt reopening of the bank and recommencement of normal activities for its customers. “Upon completion of the above exercise, an announcement is expected to be made by end-March 2016 on the way forward that will include the treatment of current (Sh2 billion) bond investors,” said Standard Investment Bank analysts. For now, it remains to be seen whether the new appointments made at the CBK would help boost supervision, help clean up the mess in the banking industry and prevent a continuation or a repeat of the circumstances that led to the misfortune of Imperial and Dubai banks. These are the loopholes that the CBK would be seeking to seal as it tries to return confidence in Kenya’s banking industry.