Police launch manhunt for 8 defiant National Bank and Chase Bank executives

Inspector General Joseph Boinett speaking to the press

Police last evening began the hunt for the eight banking executives who defied a surrender order.

Inspector General Joseph Boinett issued arrest warrants on a busy day for top government officials who went on overdrive to dispel fears of a banking crisis after Chase Bank sank on Thursday sending shockwaves in the financial sector.

By 8pm, none of the former executives from the National Bank of Kenya and Chase Bank had showed up at the Directorate of Criminal Investigations, more than four hours after the ultimatum expired.

Ndegwa Muhoro, the DCI boss, told The Standard on Saturday that a manhunt for the eight had started with fears that they could have fled to avoid arrest.

“We are now looking for them after they defied the order to surrender themselves,” Mr Muhoro said of the eight top managers.

Mr Boinett had directed the arrests citing that the executives had been involved in unethical conduct, including illegal lending to themselves and to their cliques in disregard of all guidelines.

“... I have therefore ordered the immediate arrest of the following persons, or in lieu, they must present themselves to the Directorate of Criminal Investigations Headquarters by 3.30 pm today,” Boinett said in a statement released at 2 pm.

Among the wanted men are sacked NBK Managing Director Munir Mohamed and five other officers, former Chase Bank Chairman Zafrullah Khan, and managing director Duncan Kabui.

Confidence blow

The arrest warrant came about two hours after President Uhuru Kenyatta gave his approval of the Central Bank of Kenya’s move to place Chase Bank under receivership.

Mr Kenyatta, who wound up his official tour of France and Germany yesterday, said he was confident that the painful decisions taken by Dr Patrick Njoroge, the CBK boss, were essential to clean up the country’s financial system.

“Our major interest is to protect depositors’ money and ensure all banks follow the law and regulations in the sector. I am not worried because the CBK is working hard to remove weaknesses in the banking sector,” Kenyatta said.

The President added that the banking sector was doing well, and it is the reason he had approved of CBK’s actions in streamlining the sector.

“Njoroge is doing all he can in the interest of the sector and the cleaning up does not mean that the banking sector has collapsed,” he added, citing that he had issued a Presidential directive that all of Chase Banks’ depositors were protected.

Mr Boinett’s arrest order would be the strongest statement yet expected to restore confidence in the banking sector which has for two days suffered a major confidence blow.

But as the arrest warrants were issued, senior officials from the National Treasury had convened a press briefing to deflect the soaring anxiety in the general public that was marked by massive cash withdrawals, especially from small banks.

National Treasury Cabinet Secretary Henry Rotich paraded top officials in the financial services sector at the Office of Government Spokesman Eric Kiraithe, seeking to assure Kenyans that their money was safe in banks.

As he fought to deflate fears that a crisis had befallen the banking sector, he tried to explain that the crisis at Chase Bank – the third such failure in nine months-- was actually attributed to challenges that were specific to individual lenders.

“We are in support of the actions taken by CBK to isolate those banks with challenges and address them, but the banking industry is very stable and sound,” said the CS.

He added that there would be no more surprises because all other banks had complied with the reporting deadlines of March 31, and that their financial positions were “public and healthy”.

Panic withdrawals

Flanked by his Permanent Secretary Kamau Thugge and Central Bank of Kenya Governor Patrick Njoroge, Rotich described Thursday’s fall of Chase Bank as an isolated incident but was quick to add that the matter was worsened by wrong information.

Chief Executive of the Capital Markets Authority, Kenya Bankers Association and the Retirement Benefits Authority were also at the tense briefing, alongside bosses of all commercial banks.

Dr Njoroge started out by hitting at the panic withdrawals from Chase Bank, after what he described as “inaccurate information” about the financial health of the lender.

“In itself, it would not have been such a big problem but when we had people making claims that are not accurate and actually malicious, it would not have survived,” Njoroge said of the irregular lending by former executives of Chase Bank.

Commercial banks relied on the public trust to collect deposits from customers, which are then lent out to borrowers.

Imperial and Dubai banks also fell in the last nine months, with the latest crisis at Chase Bank fuelling fears that the banking sector was caving in after a sustained expansion running over 10 years.

Small banking institutions have specifically come under intense pressure in the past two days, falling victim to fears and speculation that they could be the next in the wave of crisis.

“There are spillover effects that would have unintended results for small banks,” Dr Njoroge said in the briefing.

Habil Olaka, the chief executive of the Kenya Bankers’ Association, assured Kenyans that the baking sector was strong and viable.