By The Plu & Agencies
NAIROBI, KENYA-The Central Bank of Kenya on Thursday placed Chase Bank under receivership amid relentless liquidity crisis that has hit hard the financial institution.
The national financial regulator said Chase bank faced serious cash flow issues following ‘inaccurate’ social media reports that came hot in the heels its director’s resignation.
“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.
Kenya’s law on banking directs CBK to appoint 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.
“The appointment of KDIC as a receiver for Chase Bank Limited has been carried out in the interest of its depositors, creditors and members of the public,” Read another part of CBK statement.
Chase bank sacked top officials on Wednesday after questions were raised over its annual financial reporting.
Curiously, the CBK had assured the public on Wednesday that there was nothing to worry about following reports that the bank was facing serious financial problems.
The decision to place the bank under receivership comes a day after the appointment of Muthoni Kuria as the new board chairperson following resignations of long-serving Chairman Zafrullah Khan and Group Managing Director Duncan Kabui.
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.
Chase Bank is the third Kenyan lender to be taken over by regulators since Patrick Njoroge was appointed as governor of the central bank in June 2015.
