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Dubai Bank mess could have been avoided

Dubai Bank mess could have been avoided

Dubai Bank chairman Hassan Zubeidi. Photo courtesy of www.businessdailyafrica.com

Dubai Bank chairman Hassan Zubeidi. Photo courtesy of www.businessdailyafrica.com

As the Dubai Bank moves closer to liquidation, the focus is shifting to the role of the regulator, the Central Bank of Kenya (CBK) to forestall its fall. The Bank had on August 14th been up under the receivership of Kenya Deposit Insurance Corporation (KDIC) which has stated that the financial mess of the bank leaves them with selling its assets as the only way forward.

Announcing the appointment of KDIC, CBK said “appointment of KDIC as a receiver for Dubai Bank Kenya Limited was done by CBK in the interest of the bank’s depositors, creditors and members of the public.”

Sections 53(2) and 54(1) (a) of the Kenya Deposit Insurance Act, 2012 require CBK to appoint the KDIC as liquidator of a bank, if KDIC as receiver for a bank, recommends that it be liquidated. In light of the above, CBK has recommended that the KDIC be the liquidator manager.

KDIC will later release information about the liquidation of Dubai Bank Kenya Limited and payment of depositors in due course.

This move has shown spotlight on whether the liquidation is a must. While it has been recommended, there seems not to be oversight, but good faith, in what the law prescribes as CBK can and would do when recommended by KDIC to liquidate a bank.

Some have argued that some interests could inform the move to liquidate, either way so as to reduce competition in the banking sector. It will be recalled the recent move by Treasury Cabinet Secretary Henry Rotich during reading the budget statement that they intend, within five years, to raise bank’s deposits to sh5B from the current sh1B.
While Dr. Njoroge, on taking over the reins at CBK differed with the move, the lack of adequate consultations between CBK and Treasury could mean that this will come to fruition. It would therefore be music to the ears of Treasury that indeed Dubai Bank is liquidated, paving way for reducing the banks in the country.

But all these all highlight the ineffectiveness of the CBK to accurately monitor banks and ensure such losses and debts are forestalled in good time. It cannot be that the CBK did not at all know of the financial mess at the bank, unless someone slept on their job or was compromised not to raise the red flag in good time.

Moving forward, it is likely that court cases could mar the Dubai Bank liquidation as some customers or even shareholders want an accurate stake of what they consider rightfully theirs.


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