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CBK Governor No Match to Kenyan Banks.
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selah
#1 Posted : Friday, April 01, 2011 11:56:42 AM
Rank: Elder

Joined: 10/13/2009
Posts: 1,950
Location: in kenya
The Kenyan banks have proven they can arm-twist the Governor and push him to a corner with sleuth techniques.

The governors plan of bringing down lending rates seems to have hit a wall after a month characterised by a market manipulation which I suspect was carried by this banks.

Now he has been forced to increase the interest rate even when we have two long term bonds in the market, to the benefits of the banks at the expense of the general economy.

I think the governor is useless our market is so susceptible to manipulation and this is because CBK has weak monetary policies that do not stimulate the economy as they aught to.
'......to the acknowledgment of the mystery of God, and of the Father, and of Christ; 3 In whom are hid all the treasures of wisdom and knowledge.' Colossians 2:2-3
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ProverB
#2 Posted : Friday, April 01, 2011 12:17:31 PM
Rank: Veteran

Joined: 3/12/2010
Posts: 1,199
Location: Eastlander
@selah.. inflation is,, in lay-man terms, defined as "too much cash chasing too few goods"..
..what do you propose as CBK's preferable method of mopping up excess liquidity in the market?
..and as a bytheway.. more than 90% of all bonds issued held by LOCAL INVESTORS are in the hands of banks.. this has been so all through 2009, 2010..and to date...check stats from cbk site or cma statistics
..Let your light so shine before men, that they may see your good works, and glorify your Father which is in heaven...Matt5:16
- 1769 Oxford King James Bible 'Authorized Version
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FundamentAli
#3 Posted : Friday, April 01, 2011 12:18:10 PM
Rank: Veteran

Joined: 11/4/2008
Posts: 1,289
Location: Nairobi
The banks dug in. CBK sent investigators to find out about the slide of the shilling against major currencies. Banks got their way. Interest rates are up. Lets face it, the thing that has been helping the value of our shilling is the high interest rates. High interest rates means less liquidity as bonds will be taken up and also means cheaper imports (cheaper dollar) which equals reduced inflation which is on everyones mind.

Could be a good thing provided government interest repayments are manageable.
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mwanahisa
#4 Posted : Friday, April 01, 2011 12:40:57 PM
Rank: Elder

Joined: 6/2/2008
Posts: 1,438
@Selah & ProverB, Others, what do you reckon will be the impact on the super bond trading profits that lots of banks made in 2010?

ProverB wrote:
@selah.. inflation is,, in lay-man terms, defined as "too much cash chasing too few goods"..
..what do you propose as CBK's preferable method of mopping up excess liquidity in the market?
..and as a bytheway.. more than 90% of all bonds issued held by LOCAL INVESTORS are in the hands of banks.. this has been so all through 2009, 2010..and to date...check stats from cbk site or cma statistics
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Cde Monomotapa
#5 Posted : Friday, April 01, 2011 12:52:02 PM
Rank: Chief

Joined: 1/13/2011
Posts: 5,964
The Governor has done his part by hiking the CBR in response to inflation. Please note that the CBR is an indicative tool & not an enforcement one. It happens that our banks are highly liquid & so don't depend much on CBK thus they respond to signals at their own pace. If our banks were liquidity strapped as it were abroad then the opposite would be true: Is it good or bad for our banks to be liquid is a question out there. Secondly, the meeting of the governor with the banks resulted in the immediate gains of Kes Vs. USD which to me enhances my confidence in CBK that they were right about the speculation & they knew exactly whom to talk to (banks) to stop it. On the otherhand i am so looking forward to KCB having made us a FORTUNE off forex trading & comissions! in the up-coming Q1 results!!
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  | | Edit by user: Saturday, April 02, 2011 11:37 AM | Reason: :-P
selah
#6 Posted : Friday, April 01, 2011 12:56:33 PM
Rank: Elder

Joined: 10/13/2009
Posts: 1,950
Location: in kenya
@proverB My arguments are when banks make most of their cash through bonds or investments in CBK instruments it beats the purpose of the banking industry.For the economy to grow we need policies that allow Banks to lower their lending rates so as to allow SME or local companies build capacity.

What we are currently witnessing is when cbk lowers its interest rates there is usually a market manipulation that occurs forcing CBK to increase it rates.

As you said inflation is caused by too much money chasing few goods,how will we have goods if all the money is with CBK and the little available is too costly.

The other thing why would a bank charge me withdrawing charges of up to ksh.100 when in actual sense they are making more than 15% out of my savings.
'......to the acknowledgment of the mystery of God, and of the Father, and of Christ; 3 In whom are hid all the treasures of wisdom and knowledge.' Colossians 2:2-3
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  | | Edit by user: Friday, April 01, 2011 12:59 PM | Reason: Not specified
Scubidu
#7 Posted : Friday, April 01, 2011 3:14:01 PM
Rank: Veteran

Joined: 9/4/2009
Posts: 700
Location: Nairobi
Just how much have banks borrowed through the CBR window this week? I'd think that's an example that the governor is more capable than most would think.

The Nairobi Law Monthly for March 2011 has a great article on 'Kenya's lazy banking'. The author is a risk manager in a Saudi Arabian Bank.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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selah
#8 Posted : Friday, April 01, 2011 3:31:44 PM
Rank: Elder

Joined: 10/13/2009
Posts: 1,950
Location: in kenya
@scubidu thanks for the article it sums up my argument.I didnt mean to say the governor was incompetent but he is powerless to control the exploitative nature of our banking system.

here is the link to the article Lazy banking


'......to the acknowledgment of the mystery of God, and of the Father, and of Christ; 3 In whom are hid all the treasures of wisdom and knowledge.' Colossians 2:2-3
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Cde Monomotapa
#9 Posted : Friday, April 01, 2011 4:19:07 PM
Rank: Chief

Joined: 1/13/2011
Posts: 5,964
So we go back on liberalisation?
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2012
#10 Posted : Friday, April 01, 2011 4:19:59 PM
Rank: Elder

Joined: 12/9/2009
Posts: 6,592
Location: Nairobi
selah wrote:
The Kenyan banks have proven they can arm-twist the Governor and push him to a corner with sleuth techniques.

The governors plan of bringing down lending rates seems to have hit a wall after a month characterised by a market manipulation which I suspect was carried by this banks.

Now he has been forced to increase the interest rate even when we have two long term bonds in the market, to the benefits of the banks at the expense of the general economy.

I think the governor is useless our market is so susceptible to manipulation and this is because CBK has weak monetary policies that do not stimulate the economy as they aught to.


I do not agree with you. The CBR increase was due to increasing inflation which has been caused by increase in fuel, poor rains and weakening shilling other factor include siasa mbaya and increase of insurance rates for cargo ships landing here after our waters were declared a war zone.

BBI will solve it :)
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