Imperial Bank culpable of fraudulent activities of substantial magnitude

After two weeks of investigations into the financial operations at Imperial Bank by Limited the Kenya Deposit Insurance Corporation (KDIC) as receiver managers, they have unearthed that fraudulent activities of substantial magnitude. Imperial Bank was also found to have misrepresented its financial statements.

A statement from the Central Bank of Kenya (CBK) explained that these activities relate largely to irregular granting of loans by Imperial Bank Limited (IBL’s) management, contrary to the legal and regulatory requirements, and the internal policies of IBL. It said

“In particular, these irregular loans were a violation of the statutory limit of lending to a single borrower, and inadequate loan loss provisions, thereby overstating IBL’s capital adequacy position.”

But all is not lost. Hope lays ahead. Despite these findings, CBK said that the fraudulent activities have resulted in a significant shortfall in IBL’s capital position.

Nevertheless, CBK and KDIC consider IBL to be viable and have examined options that will lead to the prompt reopening of the bank. These options require the shareholders to inject new capital to meet the identified capital shortfall. The ultimate objective is to ensure that the reopened bank will remain viable.

Already, with the sell of Imperial Bank Uganda, which the shareholders hope to use the proceeds to pump into the Kenya’s main operations, there is hope in the near future.

CBK met with key shareholders of the bank to discuss the issues and a tentative agreement reached. The proposal will require the injection of new capital, conversion of some of the large deposits to equity, recovery and collateralization of the fraudulent loans, as well as a change of Board of directors and senior management. The proposal envisages full access to small deposits, and a structured schedule of repayment to large depositors. CBK expressed its expectation that an agreement wit

Already, steps are being taken to facilitate the recovery of the funds that were obtained irregularly from IBL. A forensic audit and other investigations are also ongoing on the culpability of these fraudulent activities.

KDIC’s was appointment by CBK as receiver for Imperial Bank Limited (IBL) on October 13, 2015, according to the provisions of the Banking Act and of the Kenya Deposit Insurance Act.

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This proposal to re-open the bank soon suggests that our earlier article was accurate that the bank’s position is not beyond repair was accurate –

It remains to be seen how fast these proposals will be implemented to fast track the return of the bank to business and end customers’ anxieties.



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