CBK headache as four board members prepare to leave

The Central Bank of Kenya (CBK) faces a headache in complying with the law requiring staggered replacements as it prepares for the exit of four board members next month.

The tenure of four of the seven CBK Board directors ends on December 4, in what would complete the shake-up that started with the retirement of governor Patrick Njoroge and chairman Mohammed Nyaoga on June 17, 2023.

The exit of Nelius Kariuki, Ravi Ruparel, Samson Cherutich and Rachel Dzombo highlights CBK’s difficulty in complying with the law requiring phased replacements.

This deepens CBK’s legal woes, given that the terms of four other external members of the MPC – the organ responsible for making decisions that influence the supply of money in the economy – ended on August 24 but the National Treasury is yet to make replacements.

The mass changes will be in breach of the CBK Act, 2015 requiring phased exit of board members.

“The members of the board shall be appointed at different times so that the expiry dates of the members’ terms of office shall fall at different times,” reads the Act.

The four are critical to CBK operations as they make up the bank’s internal audit team and the Human Resources Committee.

At least three of them are required during any CBK Board meeting.

CBK has struggled to align with the requirement of phased replacements. The four board members were hired at the same time and their terms renewed on December 5, 2020. The law only allows up to two terms.

The CBK Act says a quorum for any meeting of the board can be achieved with the chairperson, governor and three directors – a loophole that has allowed the bank to function without recruiting additional four members.

The Act is silent on how the CBK should stagger tenures of board members in such a way that they end at different times, a practice that is important in ensuring succession without disrupting operations.

The practice of phased transition is in line with Mwongozo, the code of governance for state corporations that was started in 2015.

“The appointing authority should ensure the tenures of board members are staggered to ensure a phased transition,” the code says.

The changes mean the CBK Board, which welcomed Andrew Musangi as chairman on September 29, 2023 and Kamau Thugge as governor on June 19, 2024, will have almost an entirely new board. The oldest member will be Treasury PS Chris Kiptoo who has been on the board since December 4, 2022.

On March 10, 2023, CBK also welcomed Susan Koech as the deputy governor, having been hired to replace Sheila M’Mbijjewe when her term ended.

Last week, President William Ruto named Gerald Nyaoma the second deputy governor, ending years of operating in breach of the law.

Auditor-General Nancy Gathungu has been pointing out the governance gaps at CBK, including operating for years with four non-executive directors instead of 11.

The law requires that board members have knowledge, experience and expertise in finance, banking and monetary policy. Two must be women.

[email protected]