The Central Bank of Kenya has thrown troubled Imperial Bank under the bus, handing its more than 44,000 customers to two other lenders, killing any real prospects of its revival.
CBK Governor Patrick Njoroge said he had lost patience with shareholders and directors of Imperial after they took too long to top up capital in the lender — the decisive step in the reopening.
KCB and Diamond Trust Bank have now been appointed to handle customer withdrawals for up to Sh1 million per customer, providing much-needed relief to thousands of depositors who should get their cash by Christmas.
“This was a bank worth saving, and we have been working with the shareholders on this, but they have failed to bring the money,” said Dr Njoroge.
He said he was at pains to understand why shareholders were hesitant to invest cash they have in their accounts within Imperial.
“I would expect that they would convert their deposits to capital immediately the bank was closed and we gave our proposal,” Njoroge said.
Earlier brief
It also emerged yesterday that the Aga Khan Foundation for Economic Development had made a bid to save the bank through a capital injection, possibly in exchange for a stake, but found the financial hole too big and backed off.
Some 5,700 depositors with more than Sh1 million in their accounts have also been guaranteed the minimum pay, with the rest to be paid out in phases, and possibly after the bank’s liquidation.
According to an earlier brief issued by Njoroge, the shareholders of Imperial Bank were required to inject an estimated Sh10 billion to shore up the bank’s capitalisation, which had been eroded by massive fraud carried out by management.
“We can’t put public money into this because as CBK, we know the responsibility falls entirely on the shareholders,” the governor said, defending the decision to close the bank after its owners supposedly became hesitant to inject new funds.
Allowing depositors to access their funds through other banks could effectively mean the end of Imperial Bank, since it will have lost most of its customers and their deposits.
An estimated Sh8.8 billion would be required to pay off the customers through KCB and DTB.
The two lenders had approached CBK to enable customers access their cash when it became apparent that a turnaround deal was elusive. It is unclear if they were solely driven by the prospect of attracting the big number of prospective customers.
Customers will be required to file claims with the two lenders, who will then carry out due diligence on the request over “a few days” before the cash is made available for withdrawal.
Njoroge said such customers were free to hold their cash with the two banks or even “withdraw it all and keep it under their mattresses”.
CBK’s decision has been met with resistance from the owners of Imperial Bank, who claim to have agreed to an initial rescue plan that involved injection of Sh10 billion as capital. According to the shareholders, CBK had declined their proposal, which they felt was sufficient.
Bigger customers had also been invited to convert their deposits to equity in the revival plan that had end of November as the tentative date for reopening.
But Njoroge had warned the bank’s shareholders against writing to customers with the capitalisation request, which he termed irregular.
