HTTP 200 OK
Allow: GET, PUT, PATCH, DELETE, HEAD, OPTIONS
Content-Type: application/json
Vary: Accept
{
"id": 269651,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/269651/?format=api",
"text_counter": 462,
"type": "speech",
"speaker_name": "Mr. Githae",
"speaker_title": "The Minister for Nairobi Metropolitan Development",
"speaker": {
"id": 159,
"legal_name": "Robinson Njeru Githae",
"slug": "robinson-githae"
},
"content": " Mr. Deputy Speaker Sir, the figure that has been flushed all over that the banks borrowed Kshs600 billion is not correct. This is overnight borrowing. You borrow today and you must repay it the following day. If you do not pay, you will be thrown out of the clearing house. Therefore, it is wrong to have the turnover as the amount that was borrowed by the banks. This amount is borrowed today and is paid the following day. First of all, it is not illegal to do so. That is actually the purpose of the Central Bank under Section 36 of the Act. So, the arithmetic is wrong. Secondly, these amounts are secured by the amounts that the banks have placed with the Central Bank. The figures have been bandied here about the KCB, the Standard Chartered Bank, Barclays and Equity Bank, these are the seven biggest banks. Their clearance amount in the Central Bank is the highest, obviously. Take for example, the KCB; it has the largest branch network in the country. Therefore, its exposure will always be high. The same case applies with Barclays Bank, the Standard Chartered Bank and the CFC. So, there is nothing wrong. It has been stated that the banks did an illegality. There was no illegality at all. Thirdly - and I wish Members could consult more quietly to listen to this - you will be the most stupid banker that ever existed if you can borrow overnight money and go and invest in 90 or 180 days Treasury Bills or in Bonds. You will be the most stupid banker. You are not even worth being called a banker. You cannot mismatch your assets and liabilities. This is what the banks are being accused of; that they were borrowing from the Central Bank window and then buying Treasury Bills and one, two or three year Bonds. That is not correct. If you look at the figures of their holdings in Treasury Bills, it was actually doing the opposite. In January, the total amount held by banks in Treasury Bills and Bonds was at Kshs414 billion. As at December, it had moved down to Kshs336 billion, clearly showing that it was because of the tight liquidity that was forcing banks to borrow. This has nothing to do with Governor Ndung’u at all. The Kenya shilling is now appreciating at a rate that is making us uncomfortable. If we allow the Kenya Shilling to appreciate the way it is appreciating now at Kshs82, tourists will stop coming to this country, exports are going to suffer and remittances from the diaspora are going to suffer. Therefore, if at all Mr. Ndungu was responsible, then he has redeemed himself by the appreciation of the shilling. He has redeemed himself and, in fact, we need to commend him for a job well done, if at all he was responsible. But we are saying that these are the dynamics of the economy. The reason why this has happened is because the CBK rate was increased, increasing interest rates and, therefore, dampening appetite for loans because most of the loans are used for consumption. Therefore, these figures that are being bandied are not correct. The reason why the banks accessed the Central Bank window is because of the tight monetary conditions that were imposed by the Central Bank and the Treasury. This is what made them borrow from the Central Bank. It was not for speculation or purchase of foreign currency or investment in Treasury Bills and Government Bonds. This is routine and you would expect the biggest banks to have the largest exposure. Banks do not go to the Central Bank rate because they like it. First of all, if you are seen to be borrowing too much, you are stigmatized because then it is said that there is something fundamentally wrong with your liquidity. So, banks do this as a last resort. They try to avoid it. They go to the inter-bank market, surrender their Treasury Bills and redeem their Bonds, but do this as a last result. It is not something that they like. The reason why the banks accessed the Central Bank rates is because of their liquidity. When the case ratio was increased, it affected their liquidity. When the CBK rate was increased, it affected their liquidity. Inflation also affected their liquidity. That is the reason why the banks accessed the Central Bank rate and not because they wanted to trade with the money. Mr. Deputy Speaker, Sir, the Central Bank of Kenya (CBK) window is always higher than inter-bank rates, except for one month--- A maximum of two months from my figures, and that can be explained. The monetary policy team does not meet every day and, first of all, it checks to see whether this is permanent or temporary. It is important that we say so. We have a liberalised economy. You cannot impose exchange rates like what Rwanda did. Rwanda was able to escape this because they have a fixed exchange rate. But all the other countries that have a floating exchange rate suffered. It has nothing to do with the CBK Governor and, therefore, it is wrong."
}