CBK Governor Hopeful Chase Bank will Recover Soon

Chase Bank Kenya Ltd. was placed into receivership by the Central Bank of Kenya to protect it from its creditors for a period of twelve months a day after two executives stepped down following the statements of its 2015 financial statements and amid “inaccurate social media reports”.

“The Central Bank of Kenya (CBK) has today, Thursday April 7, 2016, appointed the Kenya Deposit Insurance Corporation (KDIC) as a receiver for Chase Bank Limited for a period of twelve months, pursuant to the provisions of Sections 43(1), 43(2) and 53(1) of the Kenya Deposit Insurance Act, 2012. Chase Bank Limited was issued with a banking license in 1996,” read the statement from the regulator.

CBK further disclosed that, it had not been able to meet its financial obligations on April 6, 2016 (Wednesday) thus, the appointment of Kenya Deposit Insurance Corp. as receiver is, “in the interest of its depositors, creditors and members of the public.”

On Wednesday the bank’s Chairman Zafrullah Khan and Managing Director Duncan Kabui resigned from their positions after the company lost money.

Addressing a news briefing on Thursday, Central Bank Governor Patrick Njoroge said Chase Bank Kenya’s shareholders had committed to raising funds and that the problems there were not complicated compared to that of Imperial Bank, which is also under receivership.

Way forward for Chase Bank

Besides the social media reports that triggered a run on deposits,  Njoroge stated that there were prior concerns: Chase Bank auditors raised concerns over the lender’s Books that had over loans worth some 16 billion shillings and the pressure on the bank begun to be felt since October 2015.

According to its financial statements published on Wednesday, had Ksh 26.6 Billion on liabilities as of December 31, 2015, compared with KSh 13.2 billion in 2014. Loans to employees and directors in 2016 amounted to KSh13.6 billion versus the Ksh3.24 billion shillings reported in March.

This was three months after the Capital Markets Authority approved its license as a securities dealer in Kenya. The approval enabled it to carry on the business of buying, selling, dealing, trading, underwriting or retailing of fixed income securities.

On this Njoroge says, “If Only Chase Bank had dealt with the insider loans and the rising Non-Performing Loans (NPLs), they would have been safe…, but we do not have a timeline on when Chase Bank will resume operations. It depends on shareholders capital injection.”

“It is too early to talk about depositor refunds, our focus now is to work with shareholders, to rebuild the bank and to reopen it,” he added.

Shareholders in Chase Bank include Amethis Finance, responsAbility Global Microfinance Fund and KfW (from Germany, France and Switzerland).

Njoroge further dismissed fears that the bank’s affiliate institution Rafiki Microfinance would affected. He said they are ‘solid and independent and will not be affected with closure.

Article by David Indeje.