Central Bank of Kenya (CBK) Governor Dr. Kamau Thugge, on July 24, clarified that the institution does not have the legal authority to compel county governments to close unauthorised commercial bank accounts.
Thugge made the remarks while appearing before the Senate Standing Committee on Devolution and Intergovernmental Relations following concerns that devolved units are operating over 1,800 bank accounts in commercial banks, contrary to the Public Finance Management (PFM) Act and Regulations.
“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,” Thugge stated.
Thugge remarks on the county finances issue
He further explained that county treasuries are permitted to make autonomous banking decisions under the current legal framework, and CBK only has access to information flagged by oversight institutions.
“We do not have the power to compel county governments to close unauthorised bank accounts,” he said.
Thugge noted that CBK provides system access and transaction visibility to entities such as the Controller of Budget, but cannot monitor or regulate county accounts in commercial banks unless irregularities are formally raised.
He urged lawmakers to consider strengthening existing policies and legal frameworks to enhance compliance.
“I recommend reinforcing Public Finance Management Regulation 82(1)(b), automating validation systems, and enforcing sanctions for non-compliance,” he told the committee.
Senators concerns
Senators raised concerns over the limited oversight and control mechanisms over county financial operations and supported the need for urgent legal reforms.
Also Read: Mbadi Introduces New System to Stop Governors from Stealing
Senator Mohamed Abbas, Chairperson of the Committee, called for mandatory reporting by banks.
“Commercial banks should provide quarterly statements of county government accounts to CBK for better oversight,” he said.
Vice Chairperson Senator Catherine Mumma added that the legal framework requires clarification.
“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,” she noted.
The Committee pledged to engage stakeholders, including the Controller of Budget, the Council of Governors (CoG), and CBK, to review Section 119 of the PFM Act.
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Senators said the goal is to establish a coherent and enforceable banking framework that promotes accountability, transparency, and proper financial management in county governments.
Also Read: CBK Opens Online Survey to Tackle Gaps in Credit Cost Platform
This comes after the Cabinet Secretary for the National Treasury and Economic Planning, John Mbadi, on Thursday, July 17, 2025, approved the proposed new system to stop governors from stealing county funds.
The move was resolved after the Controller of Budget submitted the County Budget Implementation Review Report to the Senate in line with constitutional requirements.
The report noted that the high number of bank accounts makes it difficult to track how counties are spending money, creating room for fraud and mismanagement.
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