The Central Bank of Kenya (CBK) is facing a legal problem in complying with the law requiring staggered replacements as it prepares for the exit of four board members next month amid late changes at the Monetary Policy Committee (MPC).
The terms of four of the seven CBK Board members expire on December 4, in what will complete the change that began with the retirement of Governor Patrick Njoroge and Chairman Mohammed Nyauga on June 17 last year.
The simultaneous exits of Nelius Kariuki, Ravi Ruparel, Samson Chirotich and Rachel Dzombo underscore the difficulty of the CBK in complying with a law that requires gradual replacement.
This will exacerbate the legal problem faced by the regulator since the terms of four other external members of the Monetary Policy Committee – the body responsible for making decisions that affect the money supply in the economy – ended on August 24, but the Treasury has not yet appointed members. Renew. .
The mass changes would be in violation of the Central Bank of Kuwait Law of 2015, which provides for the gradual retirement of members of the Board of Directors of the Central Bank of Kuwait.
The law states in part that “Board members shall be appointed at different times such that the expiration dates of the members’ terms shall fall at different times.”
The four members play a crucial role in the operations of the Central Bank of Kuwait as they currently form the bank’s internal audit committee in addition to the human resources committee. At least three of them are required to attend any meeting of the Board of Directors of the Central Bank of Kuwait.
The Central Bank of Kuwait faced difficulties in complying with the phased replacement requirements, especially since the four members of the Board of Directors were appointed at the same time and their terms were renewed on December 5, 2020. The law only allows for two terms.
The Central Bank of Kuwait law stipulates that a quorum can be achieved for any board meeting in the presence of the president, the governor and three directors, a loophole that allowed the body to operate without appointing four additional members.
The law does not mention how the Central Bank of Kuwait should arrange the terms of office of board members in such a way that they expire at different times, a crucial practice in ensuring succession without disrupting the organization.
The phased transformation exercise is consistent with the Monguzo State Corporate Governance Act which was initiated in 2015 to promote good governance in public institutions.
“The appointing authority shall ensure that the terms of office of directors are staggered to ensure a phased transition,” the law reads in part.
The changes mean that the Board of Directors of the Central Bank of Kuwait, which welcomed Andrew Musanje as the new president On September 29 last year, and Kamau Thug as the new governor on June 19 this year, they will now have an almost entirely new board of directors.
The most senior member will be Principal Treasurer Chris Kipto, who has been a member of the Board since 4 December 2022.
Auditor-General Nancy Gatongo pointed to governance gaps at the Central Bank of Kuwait, including operating for years with four non-executive directors instead of 11.
“Section 11(1)(d) of the Central Bank of Kuwait Law, Chapter 491 of 2014, stipulates that there must be a further eight non-executive directors on the Board of Directors. During the year under review (2023/24), the Bank had four Only members of the Board are non-executive directors who conduct business on its behalf, and their terms of service will expire on 4 December 2024.
The law requires that members of the Board of Directors have knowledge, experience, and expertise in matters related to finance, banking, and financial and monetary policy. Two must be women.
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