The Central Bank of Kenya (CBK) has placed Chase Bank under receivership for the next 12 months, a day after it announced sh742 million loss.
A statement from the bank said Kenya Deposit Insurance Corporation (KDIC) will be the receiver managers for the next 12 months. CBK said this decision has been made in the interests of depositors, creditors and members of the public.
The move was informed by the bank’s ability to meet its financial obligations. Section 43(2) of the Kenya Deposit Insurance Act, 2012 requires CBK to appoint the KDIC as a receiver of a bank, if, among others, an unsafe or unsound condition to transact exists; a bank is likely to fail to meet its financial obligations; a bank has substantially insufficient capital or if there is a violation of any law or regulation.
The statement added that one of CBK’s primary role as a regulator is to foster the liquidity, solvency and proper functioning of a stable market-based financial system.
Chase Bank Limited experienced liquidity difficulties, following inaccurate social media reports and the stepping aside of two of its directors. Consequently, it was not able to meet its financial obligations on April 6, 2016.
Yesterday, Chase Bank chairman Mr. Zafrullah Khan and group managing director Mr. Duncan Kabui following concerns over the credibility of the bank’s financials.
“Following the publication of the 2015 financial statements Mr Zafrullah Khan and Mr Duncan Kabui have stepped aside from the positions of chairman and Group Managing Director respectively,”
said the bank in a statement to the media.
The bank has attracted attention after its earnings dropped from a profit of Sh2.3 billion in 2014 to a loss of Sh742 million in 2015. Insider loans and advances jumped from Sh1 million to Sh10 million in the period under review.
Chase Bank’s non performing loans jumped from Sh3 billion in 2014 to Sh11 billion in 2015.
While CBK Governor Dr. Patrick Njoroge was silent on rumors of the banks financial standings released yesterday, he blamed mounting banking sector woes on weak lending policies and management failure.
He said
We are going for stringent auditing of bank books including IT audits.
The appointment of KDIC was pursuant to the provisions of Sections 43(1), 43(2) and 53(1) of the Kenya Deposit Insurance Act, 2012.
Kenya Deposit Insurance Corporation (KDIC) will assume the management, control and conduct of the affairs and business of the institution and to exercise all the powers of the institution to the exclusion of its Board of Directors and advise CBK of an appropriate resolution strategy as soon as is practicable and not later than twelve months.
This means that while Muthoni Kuria who was yesterday appointed as Chase Bank’s chairwoman and Chief Executive Officer Paul Njaga retained, these positions are no long tenable for the next twelve months.
Chase Bank Limited, a tier 2 bank was issued with a banking licence in 1996.
