KCB commences Ksh.3.2 billion payments to Imperial Bank depositors


Imperial Bank
Imperial Bank

In Summary

  • The depositors are set to receive Ksh.3.2 billion over the next four years, an equivalent sum to the value of assets acquired by KCB in IBLIR in its final offer last year.
  • KCB will make a first tranche payment of Ksh.400 million representing 12.5 percent of total deposits before following up with a similar settlement at this time next year. The balance of Ksh.2.4 billion will be payed in three tranches of Ksh.600 million.
  • 93 per cent of Imperial Bank depositors have so far received compensation following the collapse of the bank in October 2015. Both CBK and KDIC continue to seek a suitor for the remaining part of IBLIR.

KCB Group has began processing payments to Imperial Bank Limited in Receivership (IBLR) depositors following its acquisition of part of the defunct lender.

On Friday, the lender announced it had kicked off the payments on September 3 following approvals by IBLR receiver manager — the Kenya Deposit Insurance Corporation (KDIC)

The depositors are set to receive Ksh.3.2 billion over the next four years, an equivalent sum to the value of assets acquired by KCB in IBLIR in its final offer last year.

KCB will make a first tranche payment of Ksh.400 million representing 12.5 percent of total deposits before following up with a similar settlement at this time next year.

The balance of Ksh.2.4 billion will be payed in three tranches of Ksh.800 million on the second, third and fourth anniversary of the deal.

“This is significant progress in our efforts to ensure that Imperial Bank depositors receive their long-awaited dues. We remain committed to support the recovery of funds and we are optimistic that these efforts will be a success in the fullness of time,” said KCB Group CEO Joshua Oigara.

In April last year, the Central Bank of Kenya (CBK) announced the final offer for IBLR in which KCB took up a slice of five branches in the collapsed lender.

In its statement which was subsequently followed by payments to IBLIR depositors, the CBK and KDIC insisted of their commitment to the depositors of the defunct bank.

“CBK and KDIC reiterate their commitment to protect the interest of depositors, creditors, and the wider public interest. This is in keeping with their respective mandates and in accordance with the Laws of Kenya,” the pair noted in a statement on April 5, 2019.

KCB which was charged with the role of disbursing payments confirmed 93 per cent of the bank’s eligible depositors had been paid fully.

The lender curved out five strategic branches from IBLR including two in Nairobi and one each in Mombasa, Diani and Eldoret.

In August however, KCB trimmed Ksh.6.5 billion from its pay out after an audit of the IBLIR balance sheet.

Imperial Bank went under in October 2015 with CBK placing it under KDIC management over what it termed as unsound business practices.

At the time of grounding, the lender had 27 branches spread out across the country.

Its placement into receivership would cause pain to not only depositors but also investors who bought into its issued corporate bond on the Nairobi Securities Exchange (NSE).

Moreover, the grounding would at a torrid time for Kenya’s banking sector as two other lenders-Chase Bank and Dubai Bank collapsed.

Since then, the CBK has moved to strengthen the policing of banks in the country along with the KDIC which works to insure depositors’ monies.

In October 2019, KDIC announced it had raised the coverage of customer deposits from Ksh.100,000 to Ksh.500,000 beginning July 1,2020 translating to an equivalent 98 per cent coverage of all bank customers in the Kenya.

The lift in coverage means any bank customer today can recover an average of Ksh.500,000 should his or her bank collapse.

Given the majority of Kenyans have less than Ksh.100,000 each in bank accounts, the improved coverage ensures for a near full proof cover for public funds in local banks.

KDIC move to charge premiums to banks on risks undertaken was however postponed to July 2021 as lenders came under unprecedented shocks from the COVID-19 pandemic.

The deposit insurer however remains keen on strengthening its mandate as it mulls having banks establishing wills as an additional buffer to coverage.

“We would like banks to eventually do a resolution plan which essentially gives us living wills in case of failures entailing details on how the lender would want the succession of their estates to be. There is always another other side to the greener one,” said KDIC CEO Muhamud Ahmed on August 30, 2019.

Both CBK and KDIC continue to seek a suitor for the remaining part of IBLIR.

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Story By Kepha Muiruri
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