Committee Chairman Adan Keynan allowed Central Bank of Kenya (CBK) Governor Prof Njuguna Ndung’u to name the banks in camera after he declined to divulge confidential details about them in the presence of reporters.
“Chairman, I would like to request that I answer that in camera and not in front of (journalists),” pleaded the governor.
He was responding to a challenge by Dujis MP Adan Duale to disclose the rogue banks that were behind the near collapse of the exchange rate which rapidly devalued by more than 25 percent in a span of two months.
In the stormy session, the legislators insisted that they had a right to information on the currency speculators saying public interest overrides the need by the regulator to protect client information.
The challenge to disclose those responsible was prompted by revelations by the governor that one bank was fined Sh1 million and suspended from forex trading for a period of 30 days for violating its Central Bank guidelines to check speculative tendencies.
Although he declined to say which bank it was, CFC Stanbic did admit to the panel in mid December last year that it was banned by the regulator from inter-bank trading.
Prof Ndung’u also told the committee of how five out of 43 banks held 55 percent of forex holdings as at Sep 30th 2011 prompting the MPs to demand additional data on how much these banks had in their possession from June to December last year.
While he admitted that the regulator did carry out ad-hoc investigations seeking evidence of arbitrage, the governor maintained that they did not find any such dealings.
He was however at pains to explain why then the CBK threatened to take regulatory sanctions against five commercial banks suspected of forex hoarding and speculating on the shilling.
“It was not speculation but pure arbitrage behaviour of the market; that is taking position in line with the portfolio you have. If you are going to hold it (currency) and wait, then that becomes speculation,” he told the unconvinced lawmakers.
Prof Ndung’u has been criticised for failing to defend the shilling which in October 2011 touched a historic low of Sh107 to the dollar. He has been accused of working with politically connected bank managers to delay the intervention measures and allow the concerned institutions to make a kill.
The governor however vehemently denied the allegations adding that the actions he took were informed by the need to defend public policy, which he is convinced they managed to do.
At the start of the parliamentary session, he came under intense fire for seeking legal opinion from the clerk of the National Assembly on whether he could disclose any information to the MPs. The Select Committee interpreted that as the CBK’s way of trying to undermine the team, which did not go down well with them.
It did not help matters either that the governor brought with him a legal counsel, George Oraro and efforts to explain that the move was informed by the need to protect CBK against any legal implications fell on deaf ears.
The explosive session, which marked the third time the governor was appearing before the committee, is likely to be the last one before the PSC compiles its final report on what could have triggered the shilling to plummet, making it one of the worst performing currencies in the world.
On Monday, Committee indicated that a report on the same would be ready by Monday next week.