KDIC gets six months extension to manage troubled Imperial Bank

NAIROBI: Imperial Bank Limited (IBL) has failed to pull ‘Chase Bank miracle’ forcing the receiver manager to apply for extension of his stay at the lender’s offices.

Central Bank of Kenya (CBK) has handed Kenya Deposit Insurance Corporation (KDIC) a six-month extension ahead of expiry of their initial one-year term set for Thursday next week.

“KDIC will maintain the control, management and conduct of the affairs and business of the institution to the exclusion of its board of directors,” CBK said in a statement to media houses.

This extension that will run until April 13, 2017, is crucial for creditors and depositors since it signals CBK commitment to try to revive the bank as opposed to liquidating it. According to IBL Depositors Lobby Group lawyer Josephine Kogweno-Mbori, the extension is a relief to the depositors as it gives them a glimpse of hope in their quest to access their money.

“Because it is not liquidation, we hope that something can be done within the six months. Liquidation will be the most hurting thing for depositors. We hope that there will be substantial progress within the six months,” she said.

She also feels that the ongoing court cases could have informed part of the reason for the extension of KDIC mandate.

The recovery of the bank has been slow, at least when compared to another lender — Chase Bank — even though CBK has maintained that Chase’s case was different and a bit light to handle. Last week, the regulator, together with receiver manager, filed a suit at Milimani Law Court, Commercial Division, seeking to recover Sh45 billion from shareholders and directors of Imperial Bank.

In their petition, they argue that forensic investigations on financial irregularities at the bank revealed gross negligence and breach of fiduciary duty (a legal obligation of one party to act in the best interest of another) leading to complex and long running fraud.

They are therefore seeking orders to seize all known property and assets of the bank’s directors and shareholders as well as that of over 40 companies linked to them.
In May, Capital Markets Authority announced that it had also begun enforcement proceedings on seven former IBL directors over Sh2 billion corporate bond. It is seeking to determine the joint or individual liability of the former directors in issuing a wrong information memorandum to investors leading to misinformed investment decision.
It has not been a rosy walk for depositors to get their money in the last one year. In July, they got a reprieve after shareholders withdrew their suit giving KDIC green light to liquidate the bank’s Treasury Bills portfolio to raise Sh9 billion. That made it possible for account holders to access additional Sh1.5 million each.

Yesterday IBL Depositors Lobby Group filed an application to enjoin the case filed by CBK and KDIC on September 30 to recover money from directors. Further directions are expected today.
According to Ms Kogweno, depositors want to be party to the suit since they are victims of the IBL fraud.