Opinion and Analysis
The Imperial Bank head office on Westlands Road in Nairobi. PHOTO | FILE
The Central Bank of Kenya. The regulator must strengthen its supervisory and market surveillance roles. PHOTO | FILE
By BUSINESS DAILY
The disagreement between shareholders of Imperial
Bank Limited and the Central Bank of Kenya (CBK) is a bad signal to
depositors who suddenly lost access to their cash on October 13.
It means recent assurances from the regulator were too
optimistic, leaving individuals and businesses with the scary prospect
of losing a substantial part of their savings.
If the bank cannot be reopened, for whatever
reason, the maximum a depositor is entitled to is Sh100,000. Any
additional compensation is contingent on the liquidator realising
surpluses –after creditors have been paid— from sale of a collapsed
bank’s assets.
With Imperial going into receivership with over
Sh80 billion in deposits, it is understandable why the two parties are
keen on reopening the bank.
But that is no easy task, as the apparent fallout
demonstrates. Perhaps the biggest obstacle to resolving the crisis is
the amount of new capital needed to stabilise the institution.
CBK is understood to have asked the shareholders to
provide Sh40 billion but the owners are willing to put in only Sh10
billion, resulting in the stalemate.
There are additional points of disagreements but
the Sh30 billion funding gap is the major issue. If unconstrained by the
courts, the CBK has to take a decision on how the Imperial mess will be
resolved.
The regulator, through its agency the Kenya Deposit Insurance Corporation (KDIC), now has full control over the bank.
But whichever course of action it chooses, the CBK
must ensure it is the optimum one from the standpoint of depositors who
are innocent victims of the scam that led to the bank’s closure.
If the regulator believes that the Sh10 billion
offered by the shareholders is inadequate, then it must ask them to top
up the amount or accept dilution from the entry of a strategic investor.
Liquidating the bank should be the last option
which, if implemented, is likely to result in a lot of pain for
depositors if history is any guide.
Most of the depositors in Trust Bank, which was
liquidated in August 2001, are yet to be fully compensated to this day.
The liquidation came after the bank’s revival plan collapsed, with its
directors refusing to repay some of the fraudulent loans disbursed to
them.
Besides protecting Imperial’s depositors, the
government must investigate and bring to book all the perpetrators of
the bank’s fraud.
Imperial’s founder and former CEO, the late
Abdulmalek Janmohamed, on whom the scam has been blamed, must have had a
lot of helpers
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