Family Bank, Prime Bank fight off financial strain concerns

Two local commercial banks have come out to assure customers of sound operations in the wake of rising speculation over their affairs.

Mid tier lenders Prime Bank and Family Bank have been in the eye of a social media storm over links to practices that many consider grounds for investigation.

The assurance comes as the two banks seek to avoid panic withdrawals that could put them under financial strain.

Family Bank, which has been linked with the transfer of billions of shillings in the National Youth Service (NYS) fraud case, said in a statement the bank remains financially sound and is assisting in the investigations.

“We can confirm that we have consistently met the statutory liquidity requirements as directed by the banking regulatory authority, the Central Bank of Kenya,” Family Bank said in a statement.

The bank may have learnt from Chase Bank’s experience in March, where panic withdrawals forced the Central Bank of Kenya to place the bank under receivership.

The central bank has called for the prosecution of former managers that were involved in approving the transfer of funds on grounds of money laundering.

In a letter to the Director of Public Prosecution, CBK governor Dr Patrick Njoroge said prosecution of those involved in money laundering would strengthen the banking sector.

“The prosecution of Family Bank and other related parties involved in non–compliance with reporting is unlikely to have an adverse impact on the bank. On the contrary, it will have a positive effect on the sector and enhance accountability,” he said in the letter.

Prime Bank has over the last week been linked to Uganda’s Crane Bank which was placed under receivership in October.

Prime Bank chairman Rasik Kantaria has significant shareholding in both banks.

Prime Bank management has however sought to distance itself from Crane Bank adding that did not have any shareholding in the bank.

“We have lodged a complaint with Central Bank of Kenya and cyber crime unit if the CID, regarding the false rumors and requested them to investigate and initiate immediate action in this matter,” the bank said.

The central bank has been tightening bank supervision even as three banks were placed under receivership in under a year.