Kenya's central bank to extend credit to restore banking sector stability

The Central of Bank of Kenya (CBK) said on Sunday it would extend credit to any bank or micro finance institution that comes under liquidity pressure, in order to boost the stability of the banking sector.

CBK Governor Patrick Njoroge told a media briefing in the capital Nairobi that the move follows public anxiety triggered by the placing into receivership of Chase Bank last week.

"From Monday we will avail a credit facility to any bank or micro finance institution that comes under liquidity pressure arising from no fault of their own.

"This credit facility will continue for as long as necessary in order to restore stability and confidence in the banking sector," he said.

Njoroge said Chase Bank "failed as a result of inaccurate information that was circulated that led to a rapid withdrawal of funds by depositors."

He denied reports that the banking sector in Kenya is facing imminent collapse. "This situation is not unique to Kenya because during the global financial crisis jurisdictions such that U.S. created credit facilities to restore confidence in their banking sector."

He claimed the industry is currently going through a realignment phase which would leave the industry solid.

President Uhuru Kenyatta earlier assured Kenyans that the banking sector remained stable, telling those banking with the affected banks that they would not lose their money.

Speaking in Thika in central Kenya, Kenyatta expressed his support for the CBK in its bid to streamline the country's financial systems.

He also warned those he said was using banks to conceal proceeds of corruption.

The placement of Chase Bank under the management of the Central Bank has thrown the banking industry in Kenya into anxiety, five months after another lender, Imperial bank, was placed under receivership by the market regulator. Endit