Central Bank of Kenya to offer Liquidity Support to Commercial and Microfinance Banks

The Central Bank of Kenya will provide liquidity to domestic lenders facing constraints after a run by depositors beginning Monday, April 11, 2016.

Governor Patrick Njoroge in a statement says the move is attributed to the placement of Chase Bank Limited under receivership on April 7, 2016, due to its inability to meet its financial obligations.

“We will avail a facility to any commercial or microfinance bank that comes under liquidity pressures arising from no fault of its own. We will avail this facility for as long as is necessary to return stability and confidence to the Kenyan financial sector,” Njoroge said in a statement.

The Governor further reiterated that he has confidence in the rigor and strength of the banking sector and they will ‘continue to monitor and oversee full compliance to our laws and regulations’.

He also warned that action will be taken to those who abuse their positions in the management of the financial institutions.

“As has also been indicated, firm action will be taken against those who have abused their fiduciary positions of management of our financial institutions.”

On April 8, the police ordered the arrest of Chase Bank Chairman Zafrullah Khan and Group Managing Director Duncan Kabui. It also asked for the detention of six other directors from state-owned National Bank Ltd who were placed on forced leave last month pending an internal audit.

Alert from IG @JBoinnet cc @NPSOfficial_KE pic.twitter.com/UMzchPKnRm

— Ministry of Interior | Kenya (@InteriorKE) April 8, 2016

Chase Bank is the third Kenyan lender to be placed under receivership by the CBK. Imperial Bank Ltd. was taken over by the regulators in October, while Dubai Bank Kenya Ltd. went into liquidation in August.