Chase Bank placed under receivership, branches and ATMs closed
Mid tier lender Chase Bank has been placed under receivership by the Central Bank following a spate of panic withdrawals.
In a statement, the banking regulator says the bank will be under receivership for 12 months following what the CBK considers to be unsafe financial conditions.
The closure of the bank comes barely a day after Group Chairman Zafrullah Khan and group managing director Duncan Kabui quit after restating the bank’s financial performance.
“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 April 6, 2016,” CBK said in a statement.
The restated financials also show that the bank had understated its conditional liabilities which stood at Sh26.6 billion as opposed to Sh13.2 billion it had earlier published. The bank had also understated its loans to employees and directors which amounted to Sh13.6 billion against the Sh3.24 billion shillings reported earlier. The bank’s nonperforming loan portfolio also shot up to Sh11 billion in 2015.
Hundreds of customers had gone to the bank on Wednesday to withdraw their money as reports circulated on social media that the bank would close. On Wednesday CBK Governor Dr Patrick Njoroge put a brave face classifying that as malicious rumors that could be harmful to the banking industry.
“We will follow the people who are putting out malicious rumors. They can bring down many other things including not just this (Chase Bank),” Dr Njoroge said on Wednesday.
Many small lenders having been facing similar challenges. with fears they could be shut down as the regulator enforced bank supervision.
The Kenya Deposit Insurance Corporation has been appointed as receiver manager, to assume the management, control and conduct of the affairs and business of the institution and advise CBK of an appropriate resolution strategy.
Chase Bank becomes the third bank to be placed under receivership under the reign of Dr Njoroge. In 2015, the regulator placed Dubai Bank and Imperial Bank under receivership in the space of two months citing unsafe banking conditions.
Dubai Bank is currently undergoing liquidation, while in the case of Imperial Bank the CBK has delayed making a decision on the bank as it carries out further forensic audits and investigation. At the center of the audit is how Sh38 billion was siphoned out of the bank.
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