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Speaking at the 7th Annual Banking Research Conference organised by the Kenya Bankers of Association (KBA), the Central Bank of Kenya (CBK) governor Patrick Njoroge urged banks to uphold integrity, transparency, and corporate responsibility in their businesses.

The advice comes after five Kenyan banks were recently fined for handling NYS fraud money thereby increasing the need to review the ethical structure of banks in the country.

The CBK governor referred to the global financial crisis of 2008 as an example which led to dire effects like the closure of Lehman Brothers, a company that had been for existence for 158 years. Njoroge believes the financial crisis was caused by a lack of ethics

“There is, therefore, need for something else besides a set of rules to control the behaviour of people and institutions: we need to understand and pursue ethical values,” he said.

To ensure that banks balance the interest of their customers and their profit interests, the Governor offered the following recommendations:

Developing a Responsible Corporate Culture

Njoroge urged banks to develop a responsible corporate culture where printed slogans, ethics, and code of conduct rules are actually put into action. For instance, if a corporate culture of breaking the rules in favour of pursuing profits is created, then employees will do the same.

At the end of the day, it is the culture you create in your business that will determine how employees and other stakeholders behave, Njoroge said.

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“The banking sector’s role in economic development calls for a balance between the pursuit of economic profit and serving the community in an environment of shared prosperity. When financial institutions start to embrace excessive risk and questionable practices, they stop performing their ethical-social function, which is necessary for society’s prosperity,” he asserted.

Transparency is at the Center of Ethical Behaviour

Kenyan banks have been accused of not revealing to customers the pricing of products and services especially with regards to loans. The CBK Governor noted that banks are improving in this area but admitted that more needs to be done.

Compliance without Integrity is Futile

Njoroge emphasised that complying for the mere sake of it is not enough. Integrity is important, he said.

“Two weeks ago yesterday, we informed the Kenyan people of the action we took against some of you because of non-compliance with integrity laws. […] We considered all the possible negative outcomes that could be triggered by those actions. Ultimately, however, we did not hesitate, and would not hesitate to do it again, under similar circumstances,” the CBK Governor said.

“Banks must steer away from being used as conduits for ill-gotten funds. The Kenyan people – Wanjiku – demand that of us, and will treat us very unkindly, were we to look the other way.”

The conference was themed ‘‘Credit Market Dynamics in an Evolving Regulatory and Market Participants’ Environment.’’

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