CBK ruling on Imperial Bank stirs confusion

Imperial Bank depositors have been thrown into confusion after the Central Bank of Kenya (CBK) and shareholders read the court ruling on the bank’s assets and liabilities differently.

Shareholders say the November 4 ruling has given the bank a chance of survival, stopping the regulator from transferring its assets, but CBK, which is moving to effect the ruling, insists the Kenya Deposit Insurance Corporation (KDIC) should pursue options of paying up depositors.

In a carefully worded statement, CBK and KDIC said they had rejected two attempts to open the bank but would remain open to talks with shareholders.

“The final proposal by the shareholders on June 15, 2016, was rejected, in which the shareholders withdrew their offer to inject Sh10 billion and replaced it with a proposal to raise Sh5 billion by way of a rights issue,” said CBK in a statement yesterday.

In the meantime, the bank will restart the process of paying 40 per cent of the remaining amount of verified deposits above Sh2.5 million through NIC Bank Ltd (NIC), which will bring the cumulative payout ratio for all verified deposits to about 59 per cent.

“KDIC and CBK will continue the processes that were suspended by the court and in particular, NIC’s due diligence and contract review, which is expected to lead to structured access to the remaining deposits,” said CBK.

INCRIMINATED INDIVIDUALS

Justice George Odunga ruled the transfer of assets done outside the applicable Laws including the Kenya Deposit Insurance Act and the Fair Administrative Action Act, 2015 must be stopped.

CBK said it has so far acted within the laws.

Justice Odunga also ordered that any steps that would result in liquidation be stopped until the relevant legal provisions are complied with, which the shareholders cite against the NIC deal.

High Court ordered CBK to give shareholders information so long as it does not compromise the case to recover Imperial Bank’s assets and pursue the individuals incriminated.

CBK has responded by revealing that the amount lost was Sh44.9 billion and that the directors and shareholders will be charged for fraud, breach of fiduciary duty and negligence.

CBK also says it has filed a suit to recover the money, which it will use to settle depositors and other stakeholders’ claims.

Justice Odunga also ordered that bondholders and depositors be furnished with information concerning the arrangements entered into with NIC, Kenya Commercial Bank and Diamond Trust Bank, and the manner in which the depositors are to be dealt with.

The regulator said KDIC had appointed NIC as the Asset and Liabilities Consultant to disburse an additional Sh1.5 million each to the remaining depositors, subject to account and identity verification.

In addition, the Agreement provided that NIC would undertake an assessment of the quality of IBLR’s assets and liabilities, support the recovery of IBLR’s loans, and following negotiations, assume certain assets and liabilities as well as the majority of IBLR staff.