Moments after troubles started spilling over for Chase Bank, the university community and institutions of higher learning have taken to their communication channels to advise students to stay away from the embattled Bank.
Strathmore University which houses a branch of the bank has allegedly informed their students to halt depositing fees into their Chase Bank account atleast for sometime. Central Bank of Kenya on Thursday placed Chase Bank under receivership following liquidity problems.
The regulator noted that the bank experienced cash flow difficulties following ‘inaccurate’ social media reports and the stepping aside of two of its directors. The bank was not able to meet its financial obligations on April 6, 2016.
“In light of the above, we have appointed the Kenya Deposit Insurance Corporation (KDIC) to assume the management, control and conduct of the affairs and business of the institution and to exercise all the powers of the institution to the exclusion of its Board of Directors and advise CBK of an appropriate resolution strategy as soon as is practicable and not later than twelve months from date of appointment,” said CBK in a statement to media houses.
Section 43(2) of the Kenya Deposit Insurance Act, 2012 requires CBK to appoint the KDIC as a receiver of a bank, if, among others, an unsafe or unsound condition to transact exists; a bank is likely to fail to meet its financial obligations; a bank has substantially insufficient capital or if there is a violation of any law or regulation.
Chase bank sacked top officials on Wednesday after questions were raised over its financial reporting. The exit of Chase Bank’s Group Managing Director Duncan Kabui and Chairman Zafrullah Khan followed the release of two sets of financial statements within a span of six days. The first set had understated insider loans to staff and directors by about Sh8 billion, necessitating the second set of statements.
The development comes a week after another lender, National Bank of Kenya, suspended CEO Munira Ahmed, and five other top managers over audit queries.
Governor Njoroge of Kenya’s Central Bank has vowed to enforce discipline in the banking sector, closing two banks within his first three months in office and demanding that lenders raise their provisions for loans commensurate with their levels of lending and the higher default risk following movements in interest rates.
Imperial Bank and Dubai Bank were closed in quick succession, in what was described as toxic lending practices, according to the CBK boss. National Bank of Kenya has, for instance, reported a Sh1.2 billion net loss, after announcing a Sh3.2 billion profit only three months earlier – on account on stricter reporting guidelines. Beyond the banks, Dr Njoroge has threatened to blacklist audit firms he suspects are colluding with lenders to cook books and conceal financial challenges.