CBK gives nod to wind up Chase Bank


Chase bank branch in Nairobi
File image of a Chase Bank branch. PHOTO| COURTESY

In Summary

  • The approval of the wind up process is on the recommendation of the Kenya Deposit Insurance Corporation (KDIC), the lender’s statutory/receiver manager since April 2016.
  • The placement of the bank under statutory management was on the backdrop of events on April 6, 2016, which saw panic withdrawals from the bank caused by ‘unconfirmed’ rumors largely on social media which ended in a run on the lender.
  • The resolution of Chase Bank leaves Imperial Bank Limited as the only other lender in receivership. Charterhouse Bank Limited is the other bank under the watch of CBK and currently lies in statutory management.

Chase Bank, technically referred to as Chase Bank Limited in Receivership (CBLIR), will cease to exist after the approval of its liquidation by the Central Bank of Kenya (CBK) on Friday.

The approval of the wind up process is on the recommendation of the Kenya Deposit Insurance Corporation (KDIC), the lender’s statutory/receiver manager since April 2016.

The CBK has agreed with KDIC’s view on the weakened financial and liquidity status of CBLIR which has left liquidation as the only option on the table.

“CBK has assessed the recommendation by KDIC, and considered that liquidation would facilitate the orderly resolution of the residual assets and liabilities of the bank,” the CBK said in a statement issued on Friday.

“Subsequently, CBK has appointed the KDIC as liquidator of CBLIR. KDIC will release information about the liquidation of CBLIR and payment of depositors in due course.”

On April 7, 2016, the CBK named KDIC as the receiver for Chase Bank following after the lender run into financial difficulties.

The placement of the bank under statutory management was on the backdrop of events on April 6, 2016 which saw panic withdrawals from the bank caused by ‘unconfirmed’ rumors largely on social media which ended in a run on the lender.

A bank run is simplify defined as the simultaneous withdrawal of deposits by customers jeopardizing the entities solvency levels.

On April 20, CBK approved KCB as CBLIR manager allowing the lender to resume limited banking operations from which customers got immediate access to deposits to a maximum of Ksh.1 million.

From this process, 97 percent of Chase bank depositors represented in an equivalent 162,970 deposit accounts accessed their funds in full.

Two years later in August 2018, 75 per cent of the value of deposits at CBLIR and an equivalent size of assets were carved out by the State Bank of Mauritius (SBMO which established a local subsidiary in the process.

KDIC has managed the remaining 25 per cent of the value of deposits alongside other assets and liabilities in CBLIR.

The decision to liquidate the remaining part of CBLIR has followed an independent external audit and the resolution of pending gaps in the lender, a process completed earlier this month according to Friday’s disclosure by the CBK.

The liquidation refers to the process of bringing a business to an end by distributing its remnant assets to claimants. This often involves selling off assets as steep discounts.

The resolution of Chase Bank leaves Imperial Bank Limited as the only other lender in receivership.

Charterhouse Bank Limited is the other bank under the watch of CBK and currently lies in statutory management.

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Story By Kepha Muiruri
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