CBK boss who tamed rogue banks but lost fight to save shilling

Patrick Njoroge is expected to hand over the governorship of the Central Bank of Kenya (CBK) to Kamau Thug this week, leaving behind a legacy of a tough regulator who wasn’t afraid to speak truth to power.

Eight years ago, on his examination before Parliament, many people, including members of Parliament, would have been forgiven for having thought a gentle economist would make an easy customer.

Today, few hold that view, after assessing his tough regulatory stance towards banks and digital lenders during his tenure.

He came out after scraping more than a few feathers. Most of the bankers and market players who spoke to The daily business They said they wouldn’t miss him.

He feared no one, excluded nothing, and favored no one, making friends and enemies in equal measure.

In the course of banking regulation, he early started his booth, warning in his inaugural press conference that he would not hesitate to crack the whip when called upon.

True to his word, the Central Bank of Kuwait shut down Bank of Dubai, Bank Imperial and Chase Bank within nine months of the governor taking office.

These closures presented Dr. Njoroge, who spent 20 years working for the International Monetary Fund (IMF), as a central bank to shed light in the dark corners of the sector.

is reading: A look at the Njoroge period of the Central Bank of Kuwait

But it also marks the beginning of a love-hate relationship with banks, many of whom have unrecordedly accused Dr. Njoroge of issuing draconian regulations that portray them as scandals in waiting, who need to be exposed at every step. .

While he may be many things to different people, he believes it is just him, at least judging by the speech he gave to Kenyatta University students during the 45th graduation ceremony in December 2018.

“In the end the only thing left is me. Am I valiantly defending my reputation? Am I the best version of myself at all times? Am I unwilling to compromise my reputation for the sake of some immediate advantage,” he said in the speech.

His father wanted him to be an engineer, but the “it” at Dr. Njoroge saw him pursue a Bachelor of Arts degree in Economics and capped it all off with a Master of Arts and Ph.D.

Dr. Njoroge, in an interview with Yale University in 2021, where he earned his Ph. D., said the biggest challenge he had ever faced as governor of the Central Bank of Kuwait was the closure of medium-sized Chase Bank in April 2016.

The bank was connected to virtually every corner of the country, in terms of people, sectors, and more. “It didn’t help that this came just a few months after we closed two more banks,” said Dr. Njoroge.

A senior official of the Kenya Deposit Insurance Corporation told The daily business “I was still in my pajamas” when I called from Dr. Njoroge to go and bolt the doors of Chase Bank, which the Central Bank of Kuwait had just closed.

This hint of regret over the closure of Chase would make a different take on struggling lenders later in his term.

At a time when some of the third-tier banks were suffering due to the flight of deposits to larger and well-capitalized competitors – ironically due to concerns caused by the three collapsed banks – the Central Bank of Kuwait stepped in with a large liquidity boost.

It also worked behind the scenes to encourage mergers and acquisitions of struggling small banks by larger peers, setting the stage for the wave of takeovers that has characterized the sector in the past few years.

Despite early shortcomings, it left a banking sector whose asset base nearly doubled to Sh6.77 trillion from Sh3.67 trillion in mid-2015, and the value of outstanding loans rose 78 per cent to Sh3.85 trillion.

He also built on his predecessor Nguguna Ndongo’s willingness to allow innovation in the financial sector, which boosted growth in financial inclusion to 83.7 percent by 2021 from 75.3 percent in 2016.

This innovation has also enabled wider use of mobile and digital money products in the economy, with total registered mobile money accounts increasing to 73.72 million from 26.5 million in June 2015.

Dr Njoroge has done well to keep inflation in check, with a cost-of-living measure deviating outside the CBK’s preferred levels of 2.5-7.5 percent in just two years of his tenure – 2017 and 2022 – when shocks related to drought, elections and external factors hit the economy.

It has also led the financial sector through the Covid-19 pandemic and the interest rate cap system, which has rattled banks and choked private sector credit.

Another win for the governor was the smooth demonetization in 2019 that saw the introduction of new generation banknotes and coins, in contrast to the turbulent efforts to do the same in other countries such as India and Nigeria.

Aside from doing “bread and butter” monetary policy, the ruler also found himself dealing with outside parties that he felt dictated or interfered with his domain.

Retired President Uhuru Kenyatta has defied calls to water checks on cash transactions of at least $10,000 (Sh1.4 million). And even with similar calls from President William Ruto, the checks still stand.

is reading: The Central Bank of Kuwait is referring to costly loans after raising interest rates to the highest level in five years

In October last year, when Vice President Regathi Gachagwa claimed in a televised interview that the country had run out of foreign exchange reserves, the outgoing head of the Central Bank of Kuwait issued a rebuttal to the executive through a morning press release, presenting what he called the “correct position.”

When members of the Kenya Association of Manufacturers complained about a shortage of dollars, Dr Njoroge told them to “understand it’s small” and to go to the forex market to buy dollars “like everyone else”.

When the Treasury Department, under which the CBK is located, tried to come up with a Financial Markets Conduct Code in 2018 that was said to protect consumers, Dr Njoroge wasn’t afraid to equate it with a veiled attack on the CBK’s mandate.

The Treasury Department-sponsored bill was the equivalent of the financial sector, he said, “for asking you to trade in your well-served SUV for a boosted Subaru.” The bill never moved forward.

“It may have bright lights, a rear-mounted, raucous exhaust and racing power but it’s still a Subaru. It’s time to act. Don’t make mistakes, CBK is under attack.

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