History of Kenyan banks put under receivership or closed down paint a gloomy picture to depositors hoping to see the banks reopen. While they may not receive all their deposits or may not bother whether the banks are reopened but only want their deposits back, this may sadly not be the case.
As it was aptly written by owaahh, only two of all banks which have collapsed in the last 32 years ever been re-opened. Only one survived. Trust Bank was reopened in August 1999 while Bullion Bank was reopened in January 2000. The depositors in both banks had agreed to capitalize part of their deposits as shares. Only Bullion survived. It was acquired by Southern Credit, then merged with Equatorial Commercial Bank.
In the current Chase Bank scenario, Dr. Patrick Njoroge, the Central Bank of Kenya Governor asked shareholders to pump in sh16.6 billion which will lead to it immediate re-opening. He said that if they can provide these monies, they will not hesitate but to re–open it forthwith. They have yet to do so.
But it has also emerged that leading banks, Kenya Commercial Bank (KCB) and Equity Bank are leading in possible buy-outs of Chase Bank. Chase Bank is strategic because of its SME focus, which enticed it to many entrepreneurs. A story by Business Daily added Commercial Bank of Africa, I & M Bank and associate Sidian Bank (formerly K-Rep) other suitors eying to cash in.
Yesterday in a press statement, Dr. Njoroge said that the bank will be availing a facility to any financial institution that comes under liquidity challenges “from no fault of their own.” This is because, there is panic among Kenyans on the stability of many financial institutions, especially mid-tier and small lenders which is leading to withdrawals.
No fault of their own knocks out Imperial Bank and Chase Bank because it is mismanagement and poor lending practices, including failure to abide by regulatory requirements and processes and internal policies that led to their collapse.
Imperial Bank problems arose due to fraudulent activities of substantial magnitude and this CBK has already indicated that it is harder to deal with that Chase Bank. The Imperial Bank Uganda was sold to Exim bank, a decision which CBK supported. While the Kenya Deposit Insurance Corporation (KDIC) has yet to provide the way forward, it is likely that the Kenyan arm will equally be sold.
Chase Bank problem is clear. There was Sh16.6 billion “problematic” loans whose chances of recovery are minimal. The unsecured loans are comprised of Sh8.7 billion suspicious loans, Sh8.7 billion loans to companies owned or related to some directors and Sh1 billion personal loans to some directors. Chairman Zafrullah Khan and Group Managing Director Duncan Kabui are the main culprits.
Kenyans should therefore brace themselves for not seeing these brands again in our banking industry but sold out and re-branded entities. But hopefully, their deposits are safe and they get them back, to continue with their businesses.
More importantly, those culpable, need to be punished. It is a laudable move that they were arrested for questioning. Only when they are charged and jailed for taking advantage of Kenyans’ trust and goodwill will these day light theft be arrested.
At least 33 banks and financial institutions have failed in the past 32 years, that makes an average of one bank every year. This should not be allowed to continue.