"Surname 4Banks dominate the Kenyan financial industry with a fifty seven percent controlling stake inthe total assets of the sector. The assets are valued at over three trillion Kenya shillings. As of2016, the sector comprised of forty two banks and over ten micro-finance institutions with anextensive branch network cross the country.The financial sector is one of the most regulatedindustries internationally, and Kenya is no exemption. It is imperative, and indeed essential,that this should be the case as banks hold our clients? money in trust.The crucial role that the lenders play necessitates the study of their capital and corporatestructures.Over the past three years the banking environment has undergone a drastictransformation pertaining to structure and regulatory frameworks. The central bank of Kenyaregulates banking practices under the Banking Act. The central bank of Kenya conducts off-siteand on-site monitoring. The industry has experienced steady growth over past few yearsregarding profitability, assets, product range.An industrywide branch network expansionstrategy has reinforced the progress.However, in spite of the accomplishments, the question of regulation has the fore, moreso over the past two years, with some investors erroneously accusing the Central Bank ofKenya of laxity for purportedly ignoring recent catastrophic events in the banking sector.1.1.4 Ethical challenges in the financial services sector(Global)By trailing the money in just about any crisis in the world, one is likely to come across thenames of familiar banks. Characteristically, banks habitually turn a blind eye when it comes toinvesting their money, and in the worst case scenario, they become complicit. This sectionoutlines a few examples of financial crises across the world attributed to a lack of ethics. 1.1.4.0 The United States of America 1.1.4.1 The real estate bubble (2007/2008)Unethical banking practices have gained particular attention in the public domain, with thedebate revolving the causes of the 2007/2008 financial crisis. The financial crunch has beenattributed to several factors and it is expected that its multifaceted roots will be discussed fordecades to come. Among the diverse elements identified as having contributed to the financialcrisis, are inadequate corporate governance and weak compensation structures whichculminated to the steady decline of ethical conduct across the global financial industry(Pezzuto, 314). According to Pezzutto, Leading commercial financial institutions had vast,concentrated exposures to the mortgage sector through asset-backed collateralized debtobligations. However, most of those firms did not understand the true extend of their exposurebecause of reckless underwriting practices, and unsound credit assessment procedure concealedin complex financial structures (314). The catastrophic phenomenon revealed how the reckless(and corrupt) behaviour of managers and weak organizational structures cause disastrousconsequences. The Financial Crisis and its continuing effects on state economies challenge collectiveconceptions of the role of banking in an economy which has generated a nearly universalpublic petition for reforms in the banking sector.Most evaluations of the financial catastrophe Surname 5that started in August, 2007 pinpoint as the foundation of the crunch such factors as inadequatemechanisms for controlling risks, excess power, and a virtually deliberate blindness to thesimmering state of affairs in the realty market. Well, perhaps these subjects were definitely theproximate reasons, however, it is the researcher?s opinion that the financial institutions andtheir official would not have been collectively irresponsible as the assessments imply. Therewere bigger issues at play that drove intelligent individuals to carry on with mindless behavior.The commonly touted causes were in fact indicators of a much worse predicament. The actualtrigger was the steady but in the long run, far-reaching breakdown of ethics across the financialsector. Once the financial industry became from its proper base, firms were at liberty to act inways that were in their short-range interest without any fear onthe longstandingeffect on theoccupation?sclients, employees as well as on the larger United States? economy.1.1.4.2 Bank of America Since its 1998 incorporation, the Bank of America evolved into one of the leading financialinstitutions globally. Offering various diverse services to both individuals and corporates, theBank of America has an extensive branch network traversing four continents and forty states.Internationally, the bank has a vast banking infrastructure consisting of thousands of bankingcenters and automated teller machines. However, in 2014, the institution was compelled to pay more than sixteen billiondollars for engaging in unethical practices. According to http://www.chroniclejournal.com,thebanker purposelypromoted and sold bad loans. 1.1.4.3Europe (The Libor scandal)In the United Kingdom, leading banks such as Barclays and HSBC have been accused ofemploying underqualified personnel to top positions. Such people gain access to sensitiveclient information, flouting a plethora of information protection rules. This not onlycontravenes the financial services standards but also raises serious concerns on theeffectiveness of regulation controls in the banking sector.Besides corruption in staffing,Barclays bank, UK, was caught in a damning unethical scandal involving a chain of corruptactions linked to the London Interbank Offered Rate (Libor) in 2012. The London InterbankOffered Rate is an average rate of interest calculated by submitting the interest rates of keybanks across the globe. The scandal was unearthed when it was revealed that banks weredeceptivelybloating or devaluing their rates so as to gain from trade deals, or to give the viewthat they were more creditworthy than was the case. , The scandal became matter of nationaland international interest in mid-2012 as the media began leaking information and explainingthe ramifications of the issues. Shortly after, the United Kingdom?s investigative divisiondealing with serious fraud initiated a criminal inquiry into the alleged manipulation of interestrates. However, the investigation was not restricted to Barclay but over twenty banks (Arnold,n.p). The scheme was astonishingly simple but creative. Since there was no predeterminedmechanism of telling the exact interest rates that banks charge one another to get short-termloans, the set Libor rate reduced daily, essentially, down to the amount determined by a group Surname 6of unscrupulous clerks. Theflagrant scheme once again raises questions on the ease at whichbank officials lose their ethicalconduct.Pressure from stakeholders for high dividends has also been recognized as anotherthreat to ethics and professionalism in the Kenyan banking industry. This is so because themanaging teams of the banks must deliver the expected results or risk losing their positions. Asa result, the management takes part in dubious dealings in order to capitalize on profits andsurpluses in the form of dividends. Consequently, professional integrity is compromised inorder to increase earnings. Moreover, where there is disproportionate pressure for profit andbonuses, at the expense of integrity, good business behavior, and service, the managementunvaryingly fails to deliver moral leadership and ethical following.1.1.5 Ethical turmoil in the Kenyan banking sector1.1.5.1 The case of Dubai BankThe first financial institution to fall was Dubai Bank Kenya, being placed in receivership inAugust 2015 and directives to close down following shortly after within the same month.While many Kenyan?s were caught unawares, the outcome was expected in some quarters afterthree years of claims, investigations and, in recent times, a confounding daily cash reservequotient, leading to this result. The warning signs soon became evident, with preliminaryexternal contentions that the institution failed to pay its borrowers, escalating to allegationsfrom Ms. Said Nereah, the former MD, that Mr. Hassan Zubeidi, the financier?s chairman, andprincipal stakeholder, was abetting a duplicitous scheme involving the embezzlement ofcustomers? funds.Ms. Said was dismissed soon after the whistle-blowing incident. After that,Mr. Dutta, another director at the bank fled the country amidst a heated criminal investigationand audit carried out by the Central Bank of Kenya, examining his role in an irregular schemeinvolving the guaranteed selling of shares that threatened to cripple the financier. The bank?sdaily cash reserve obligation breaches put the institution on the Central Bank of Kenya?s radarleading and ultimately to its collapse.1.1.5.2 The Imperial BankBarely two months after the liquidation of Dubai Bank of Kenya, the country witnessed in uttershock as yet another tier-2 lender, the Imperial Bank, closed down after regulators settled onliquidation after uncovering the risky and flawed business conditions that the lender used totransact business.At that time, the bank?s cumulative asset base amounted to over fivehundred million Kenya shillings and was categorized as one of the top twenty financiers inKenya with subsidiaries in Uganda (Miriri and Jorgic 1). The facts of the exact nature of thedisclosed concerns differ; however, sources infer to an in-house rip-off scheme instigating themove.According to Patrick Njoroge, the governor of the Central Bank of Kenya, ImperialBank?s management board notified the central bank of dubious lending practices that requiredthe immediate counteractive action to protect the interests of both savers and creditor (Ngugi1).During the audit, Kenya?s neighbor, Uganda, also followed suit and placed the Ugandansubsidiary under statutory management, an aspect that amplified the concerns of Kenya?s "