Dispute Resolution Mechanism Proposed to Reconcile Chase Bank Auditors

Former Chase Bank Kenya directors have faulted the auditor’s report on irregularly acquired properties under the Musharakah Investments.

The directors -Muthoni Kuria (Chairperson), Zafrullah Khan (former Chairman), Duncan Kabui (former group MD), Anthony F Gross (non-executive director), Richard Carter (non-executive director), and Rafiq Shariff (non-executive director) – who appeared before parliament on Thursday said, “The auditor’s insistence on treating them as insider loans and assessing that the SPV properties were not assets of the bank is untrue and misleading.”

“In addition, the auditor’s statement that the Musharakah was an afterthought to disguise insider loans is false,” they added.

Instead, they have proposed the formation of a dispute resolution mechanism that will address the ‘serious consequences of such an unreconciled disagreement between the auditors and any bank’ and a frame work that will give guidelines to the accounting treatment to be applied to Islamic products in Kenya.

In a statement, the former managers claim that the 2015 audit report by Deloitte was largely based on divergence in opinion between the auditors and the bank on matters such as the accounting treatment of Musharakah investments.

The investments in question, the former directors reiterate are assets of the bank that form part of the Islamic banking portfolio under the Musharakah investments -a product recognized under Islamic banking tenets worldwide.

Chase Bank was authorized to offer Islamic banking by the Central Bank in June 2010 and had been consistently accepted by both the Central Bank inspection team and Deloitte, the bank’s auditors, in the previous three audits Parliament was told.

The former directors added that ever since Chase Bank was placed under receivership, all the 48 shareholders in conjunction with the Central Bank have been united in their objective that the Bank is restored as a commercially viable undertaking as soon as possible to ensure, first and foremost,

the reopening of the Bank, the protection of depositors, creditors and the bank’s employees and to maintain stability in the banking sector.

The directors thanked the bank’s clients and staff for supporting the bank during that period and also thanked Central Bank and the Governor for reopening the bank within 13 days of closure which in itself demonstrated and reaffirmed Chase Bank’s strength and its unique brand.  

They reaffirmed their commitment to working with the receiver manager KCB on facilitating a speedy normalization of Chase Bank’s operations.