Roundup: Third bank under receivership as Kenya tightens regulation

A third Kenyan bank has been put under receivership in less than a year as the Central Bank of Kenya (CBK) tightens regulation in the sector.

The regulator on Thursday said in a statement it had placed Chase Bank under statutory management for a year due to unsafe financial conditions.

According to the statement, Chase Bank had experienced severe liquidity challenges.

"Chase Bank Limited experienced liquidity difficulties following inaccurate social media reports and the stepping aside of two of its directors. Consequently it was not able to meet its financial obligations on Wednesday," it said.

Chase Bank on Wednesday sacked its chairman Zafrullah Khan and group managing director Duncan Kabui after they understated insider loans by about 80 million U.S. dollars, forcing the bank to issue two 2015 financial statements.

The restated financial results published showed that insider loans -- money advanced to directors, shareholders, associates and employees of the bank -- stood at 136 million dollars last year against the 57.2 million dollars it reported on March 31.

Chase Bank is the third financial institution to be placed under receivership since August 2015 in the sector that has 42 banks. The others are Dubai Bank and Imperial Bank.

"The Central Bank of Kenya has appointed the Kenya Deposit Insurance Corporation (KDIC) to assume the management, control and conduct of the affairs and business of the institution, and to exercise all the powers of the institution to the exclusion of its Board of Directors," said the CBK.

The Kenya Deposit Insurance Act requires CBK to appoint the KDIC as a receiver of a bank, if, among others, an unsafe or unsound condition to transact exists; a bank is likely to fail to meet its financial obligations; a bank has substantially insufficient capital or if there is a violation of any law or regulation.

The receiver manager will advise CBK of an appropriate resolution strategy as soon as is practicable, but not later than 12 months, added the apex bank.

On Thursday morning, all the branches of Chase Bank remained closed as customers made frantic efforts to try and get information about their savings.

At the Kimathi Street Branch, a notice from the CBK pasted on the doors of the bank stared back at desperate customers, who could also not access their money via the ATM.

"This is madness, how do you wake up one morning and find your bank closed and you cannot access your money? Where do you turn to?" said an angry customer. Enditem