Sunday, November 15, 2015

Don’t ignore Imperial Bank rescue plan


 
By JAINDI KISERO
In Summary
  • CBK cannot stand on the moral ground and belatedly start pretending that it is best placed to prosecute the interest of the ordinary depositor.

One month later, the Imperial Bank depositor has not had access to his hard-earned savings.
Initially, expectations were high that new Central Bank of Kenya governor Patrick Njoroge - widely
regarded as untainted and free from capture by the cartel of big borrowers and its allies within CBK said to be fighting behind the scenes to have the bank permanently shut - would win the day and deliver a decision in favour of the poor depositor.
Indeed, Dr Njoroge has raised the hopes of the depositors by going on record several times to assure them that the bank would be reopened very soon. Yet beyond the rhetoric, the truth of the matter is that tangible action is not happening and chances of a quick reopening are beginning to look dimmer and dimmer.
A whole month later, we haven’t heard of a ‘statement of affairs’. No proper due diligence has been conducted save for the 10-day forensic audit conducted by  New York-based FTI. Yet we all know that before any capital injection happens, a mandatory due diligence process would have to be done.
What I gather from CBK sources and parties involved in the matter is all that has happened in the last four weeks are unending meetings between Central Bank and the shareholders where parties have been engaging in sterile agreements about who between them bears the biggest responsibility for reopening the bank.
A source from CBK told me that during a meeting on Wednesday, it was clear that the parties were yet to reach a consensus on several issues.
First, it seems that CBK wants the shareholders to put in more money in the bank. The shareholders have so far pledged to raise Sh10 billion.
With the bank in a negative capital position and having lost capital, the shareholders have pleaded that their offer be accepted.
They reportedly informed CBK during the meeting that they have been forced to sell their assets and borrow money to raise the Sh10 billion.
Secondly, it seems that the parties are yet to reach an agreement on a formula for converting deposits into shares- and on the rate of interest to be paid on deposits that would be converted into shares.
Then there is the argument about who between the CBK and the shareholders of Imperial Bank should bear the greatest responsibility of restructuring and perfecting the loan by W. Tilley, by far the largest borrower in Imperial Bank with unsecured facilities running into tens of billions.
I have said it before in this column and will say it again that on the matter of Imperial Bank, CBK cannot stand on the moral ground and belatedly start pretending that it is best placed to prosecute the interest of the ordinary depositor.
The genesis of this crisis was a conspiracy between CBK’s supervision department, the external auditors and former managing director, the late Abdul Janmohammed. What can one say of a CBK inspection and audit system that fails to capture nearly 60 per cent of a bank’s loan book?
It is all very well to play hard ball with the shareholders and to treat their rescue plan with more circumspection. But we must all remember that at the end of the day, this is a limited liability company.
What if the shareholders decide to withdraw from the negotiations altogether? You don’t turn away a shareholder who is ready with a bailout cheque.

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