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R 051329Z JUL 07
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC 0814
INFO RUEHAR/AMEMBASSY ACCRA 0908
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RUEHKH/AMEMBASSY KHARTOUM 1283
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UNCLAS NAIROBI 002754
SIPDIS
SENSITIVE
STATE FOR AF/E, AF/EPS, EB/ESC/TFS, AND S/CT
TREASURY FOR VIRGINIA BRANDON AND FINCEN
JUSTICE FOR AFMLS DE KLUIVER, OIA, OPDAT
SIPDIS
E.O. 12958: N/A
TAGS: EFIN PGOV EINV KCOR KCRM PINR KE
SUBJECT: CENTRAL BANK OF KENYA GOVERNOR REPUTEDLY UNDER
POLITICAL PRESSURE FOR STANDING FIRM AGAINST CHARTERHOUSE
REFS: (A) NAIROBI 1185 (B) NAIROBI 1026
(C) 06 NAIROBI 4469 NOTAL
1. (U) Sensitive but Unclassified. Please protect
accordingly. For USG use only.
2. (SBU) Summary: Former Central Bank of Kenya (CBK) Bank
Supervision Director Gerald Arita Nyaoma suggested to
Economic Specialist on June 29 that he fears that President
Mwai Kibaki and the State House are attempting to sideline
recently appointed CBK Governor Njuguna Ndung?u (ref B) for
standing firm against unsavory private banks such as
Charterhouse Bank (ref A). He cited as particularly
worrisome proposed amendments to the Central Bank of Kenya
Act to provide for the presidential appointment of the
Chairman of the Board of the Directors, a position
traditionally held by the Governor. In Nyaoma?s
estimation, these amendments, if adopted, would open
avenues for political manipulation of this key institution.
End summary.
---------------------------------
CBK Governor makes His First Move
---------------------------------
3. (SBU) Appointed in March 2007, Central Bank of Kenya
(CBK) Governor Njuguna Ndung?u (ref B) made his first
personnel changes in late June when he transferred Gerald
Arita Nyaoma from his position as the director of Banking
Supervision to the helm of a bigger National Payments
Systems, External Payments and Reserve Management
Department. As Nyaoma explained to Economic Specialist on
June 29, his transfer ostensibly is intended to have him
assume responsibilities as the director of a larger, more
varied department. However, Nyaoma feels his transfer may
have less to do with his abilities than with his efforts to
close shady private banks, in particular the notorious
Charterhouse Bank (refs A,C), which was shut down last
December for engaging in money laundering and tax evasion.
Nyaoma contended Kenyans with a financial stake in
Charterhouse are waging a media campaign against the CBK
claiming it unjustly closed the bank, while behind the
scenes they are putting political pressure on Ndung?u to
sideline Nyaoma and other CBK officials committed to
cleaning up Kenya?s financial sector. He alleged demands
were made on Ndung?u to have him removed from the Banking
Supervision Department. (Note: Nyaoma is scheduled to
attend the Federal Reserve?s Anti-Money Laundering
Examination Seminar to be held August 27-31, 2007 in
Chicago, Illinois with other two senior officers from
Banking Supervision Department. End Note.)
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A Career Banker takes over
--------------------------
4. (U) In Nyaoma?s stead, Governor Ndung?u promoted Rose
Alex Detho as Bank Supervision director on June 12. A
career banker, credited for liquidating errant banks, Ms.
Detho was previously assistant director in the same
department and has served on several occasions as the CBK-
appointed ?statutory manager? for distressed financial
institutions. Since joining the Central Bank in August
1988, Detho has worked as a bank examiner and financial
analyst in the Bank Supervision Department. Her new role
is to regulate and supervise the banking sector with
the core objective of fostering the liquidity, solvency and
proper functioning of a stable market-based financial
system. She has served at the Kenya Deposit Protection
Fund Board in her capacity as Liquidation Agent of a number
of failed institutions. She once deputized the Receiver,
Grand Regency Hotel, which was under the receivership of
CBK. The 47-year old banker holds an MBA and Bachelor of
Commerce from the University of Nairobi.
5. (SBU) Detho has been in the process of winding up
Charterhouse Bank, i.e., paying the depositors in
accordance with the Deposit Protection Act. Upon her
appointment, Nyaoma alleged that Charterhouse Bank members
started sending threatening messages to her phone.
According to Nyaoma, Detho had to record a statement with
the Nairobi Criminal Investigations Department (CID).
Although no action has yet been taken, the police are aware
of the threats, which Nyaoma asserted are intended to arm-
twist CBK to have Charterhouse Bank re-opened. Aside from
these threats against Detho, Nyaoma argued that
Charterhouse Bank associates are behind an effort to amend
the Central Bank of Kenya Act. He took exception to
proposed amendments to the Act which would provide for the
presidential appointment of the Chairman of the Board of
the Directors, a position traditionally held by the
Governor. Nyaoma was adamant that the proposed amendment
of the CBK Act to provide for a political appointee at the
helm of CBK as its Chairman of the Board of Directors would
compromise the autonomy of the Bank. He posed a question
?what happens if CBK wants to close a bank and the Chairman
feels otherwise like in the Charterhouse Bank case where
Finance Minister Amos Kimunya felt the Bank should not be
closed?? Last year, Minister Kimunya attempted to wrestle
powers from CBK by making a similar proposal but it was not
passed by the Kenyan Parliament. Other proposals include
creation of a second office of Deputy Governor although no
specific duties are assigned to the new office.
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Comment
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6. (SBU) The personnel changes made by CBK Governor
Ndung?u appear well intentioned but the timing is wanting.
It is not clear whether the Governor is succumbing to the
whims of certain political elites beholden to Charterhouse
Bank, although he has repeatedly informed the Econ office
that he would quit should politicians try to manipulate his
work. We will continue to monitor developments at the
institution which is at the heart of Kenya?s economic
development, especially during this election year as
politicians are bound to try to exert pressure on the
institution. End comment.
Ranneberger