The Governor of the Central Bank of Kenya, Dr. Kamau Thugge, has informed the Senate that the public institution lacks direct enforcement authority to compel county governments to close unauthorised accounts.
This development comes after it emerged that county governments were operating over 1,800 commercial bank accounts, contrary to the Public Finance Management Act and Regulations.
Appearing before the Devolution and Intergovernmental Relations earlier today, Dr. Thugge told Senators that the country’s banking regulations give county treasuries the leeway to make autonomous banking decision-making without the input of the Central Bank of Kenya.
The CBK Boss elucidated that the public institution has limited visibility over commercial bank accounts operated by county governments unless they are flagged by the oversight bodies and urged the august House to consider strengthening the existing legal frameworks.
“The Central Bank’s role is to facilitate account opening upon request by the CEC Finance and County Assembly Clerk and maintain county governments' bank accounts at CBK, excluding commercial bank accounts.Besides, we provide system access and transaction visibility to oversight bodies such as the Controller of Budget. We do not have the power to compel county governments to close unauthorised bank accounts,” Dr. Thugge submitted.
He urged the Senate to enhance adherence to Public Finance Management Regulation 82 (1) (b) by reinforcing policy and legislative instruments to ensure compliance, and consider automating the validation systems and sanctions for non-compliance.
Senators underscored the need for better oversight and transparency in county government financial transactions, proposing that commercial banks should immediately report any county government accounts and provide quarterly statements to the Central Bank of Kenya (CBK).
They pledged to consult the relevant stakeholders – including the CBK, the Controller of Budget, and the Council of Governors (CoG) – while reviewing Section 119 of the Public Finance Management Act and Regulations to come up with a coherent banking framework for county governments.
“We need to clarify the legal framework and regulations around county bank accounts, including the possibility of allowing overdraft facilities for counties to manage revenue and expenditure imbalances,” said Sen. Catherine Mumma, the Vice Chairperson of the Committee.“The Central Bank of Kenya plays a critical role as a regulator. Therefore, commercial banks should provide quarterly statements of county government accounts to CBK for better oversight,” Sen. Mohamed Abbas, the Chairperson of the Committee, suggested.
