Why NIC Bank was chosen to be the Assets and Liabilities Consultant for Imperial Bank

Even as court cases derail the future of Imperial Bank, details are emerging that NIC Bank were chosen as the assets and liabilities consultants for the bank because of certainty of commitment, solid execution plan and realistic time frame to propose the way forward.

Nine months into receivership of Imperial Bank by the Kenya Deposit Insurance Corporation (KDIC) and three months to the end of the timeline to suggest the way forward, NIC Bank beat several other banks in providing the best option to revive the bank. The Central Bank of Kenya (CBK) asked several financial institutions to suggest options they can consider, to ensure the banking sector’s confidence does not wane with time.

For NIC Bank, the CEO John Gachora distances the bank from the thoughts that they went in to make profits. He robustly aligns the reason as that of KCB Bank when they were appointed the receiver managers for Chase Bank as one meant to restore confidence in the banking sector. He argues that so long as these banks continue being closed and any new ones also collapse, they will also be affected.

The terms of the agreement with KDIC provides a two tier relationship. The first is the general assets and liabilities of Imperial Bank and how they can be restructured to profitability. The second is the assets and liabilities that they can assume (take over) and infuse better management and leadership structures to return them to operations.

Important to the bank are loans and people.

We need to get customers to start paying loans. Some decided not to pay since the bank has been inactive. For some loans, we also need to re-negotiate the payment structures, said the CEO.

But the three months time frame to the end of the period granted to KDIC by CBK does not worry the bank. They are emphatic that the period is sufficient to conduct due diligence and recommend the next steps. Moreover, KDIC Act allows for a six months extension, should the twelve months be insufficient.

A decision by Justice George Odunga stopping KDIC from disposing of Imperial Bank’s assets, some of which NIC Bank was slated to acquire means that they will have to wait longer.

The judge allowed the KDIC and NIC Bank to continue paying savers using money from the Deposit Insurance Fund and recovered loans, but ruled that Imperial Bank’s assets must be preserved for now to avoid nullifying a case filed by the collapsed lender’s shareholders challenging its apparent liquidation.

NIC says it feels the pain of employees who are mostly forgotten when banks collapse as people focus on depositors. There are also office rents, office operations and other costs currently being incurred yet the bank is not fully operational. But any agreement reached with KDIC and the Central Bank will have to be made after the court lifts the temporary injunction slated for next month.

In addition, the agreement terms between KDIC and NIC reveal intricate negotiations that also ensure that NIC is not affected directly, by being a party to the ongoing law suits. The contract which commenced on 21st June 2016 has the following terms for NIC;

  1. Analyze and assess assets and liabilities of Imperial Bank
  2. Identify and assist KDIC in making an assessment of the quality of risk of portfolio of Imperial Bank and underlying documentation
  3. Advice KDIC on the activation, negotiation, restructuring and collection of certain assets of Imperial Bank
  4. Determine which part of the portfolio may be disposed off by KDIC and assumed by NIC
  5. Determine and agree with KDIC a payout process and program for depositers of Imperial Bank
  6. Review branch network and other assets of Imperial Bank with a view to acquiring them
  7. Develop a people plan for the staff of Imperial Bank for potential assumption
  8. Disburse all Imperial Bank depositor funds on behalf of KDIC (except the first tranche which was disbursed through KCB and DTB)
  9. It is understood that the assumption agreement will contain indemnities by KDIC protecting NIC against any claims by creditors or shareholders of Imperial Bank or third parties. The assumption agreement will also set out a process under which acquired assets may be returned to KDIC or underwritten by KDIC in the event they prove to be

Imperial Bank’s problem is not liquidity as that of Chase Bank was. It is easier to deal with liquidity issues, as CBK Governor Dr. Patrick Njoroge has asserted before. Investigations into the financial operations at Imperial Bank unearthed fraudulent activities of substantial magnitude. Imperial Bank was also found to have misrepresented its financial statements.

Imperial Bank also failed to stop a Sh2 billion bond that almost traded on the Nairobi Securities Exchange (NSE) was stopped last October when the CBK and the Capital Markets Authority (CMA)  released a joint statement with CMA stopping its listing

NIC has its work well cut out to infuse better systems in the bank to ensure all players benefit and the bleeding stops.


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