By GEORGE NGIGI, gngigi@ke.nationmedia.com
In Summary
- CBK estimates that the payout will require Sh8 billion in the initial phase.
- The payout plan follows growing tensions between the CBK and Imperial Bank shareholders, who have accused each other of inaction in the restructuring plan.
The Central Bank of Kenya (CBK) will pay depositors
of the collapsed Imperial Bank up to Sh1 million in a plan that is seen
as signalling that the embattled lender is unlikely to open its doors to
customers any time soon.
The payments will be made through KCB and Diamond Trust Bank and will see 44,300 or 89 per cent of all the depositors access their full savings. The CBK estimates that the payout will require Sh8 billion in the initial phase.
Patrick Njoroge, the CBK governor, said the
regulator had decided to act after the shareholders failed to keep a
promise they made earlier to provide additional resources that would
enable the bank to reopen.
“This follows the failure of Imperial Bank
shareholder to provide adequate assurances to implement a proposal that
would enable the prompt reopening of the bank and resumption of normal
activities for its customers,” said Dr Njoroge.
“Why are we taking this route? It is because the persons who should have helped us are not there – they are missing in action.”
Depositors with more than one account in the bank
will have their savings consolidated and reimbursed to the Sh1 million
limit. The CBK was late yesterday expected to meet the depositors to
inform them of the plan.
Tensions
The payout plan follows growing tensions between
the CBK and Imperial Bank shareholders, who have accused each other of
inaction in the restructuring plan.
The CBK had previously promised to revive the bank
in collaboration with shareholders who were said to have alerted the
regulator to fraudulent activities perpetrated by a rogue chief
executive.
Cracks have, however, emerged in recent weeks
between the CBK and the owners over the regulator’s insistence that they
provide additional capital to plug the hole created by the Sh38 billion
fraud.
Imperial Bank was closed on October 13 and the
central bank said two weeks later on October 27 that it had tabled a
revival plan before the shareholders.
The CBK’s latest plan will, however, see some 5,700
depositors with more than Sh1 million at Imperial Bank access only a
portion of their savings.
The CBK promised to release a second payout plan in
March next year which will cater for the 5,700 depositors and investors
in the Sh2 billion bond that the bank issued days before its collapse.
Depositors will make their claims at any KCB or DTB
branch and such claims will take three days to confirm their details
before they are paid.
Dr Njoroge said depositors will have the option of
retaining their savings with the two lenders, a move that is likely to
boost the deposit base of KCB and DTB.
“They are the ones that answered the call,” said Dr Njoroge when asked how the CBK settled on the two.
Analysts said the payout, higher than the insured Sh100,000,
will bring back confidence in the CBK and position it as an institution
that is serving the interest of the depositors and not the rich
shareholders.
“It is a strategic way to avert a potentially
large-scale run on the bank, in case it reopens. The move also creates
ample room to start negotiating with the large institutional depositors
on the conversion to equity,” said an analyst who did not wish to be
named.
The central bank had proposed conversion of large
deposits to equity in the revival plan. The 5,700 depositors who will be
left in the bank are estimated to hold over Sh80 billion in savings.
Imperial Bank’s half-year financial statements
showed that it had Sh58 billion in customer savings. However, the CBK
discovered that the lender had understated the deposits by Sh38 billion
in order to cover for off-book lending of a similar amount.
Dr Njoroge said that Aga Khan Fund for Economic
Development (AKFED), who are the largest shareholders in DTB and Habib
Bank, had in partnership with other banks offered to pump money into
Imperial Bank to keep it afloat.
The plan was, however, dropped because of the large
amount of capital required and also to ensure that Imperial Bank
directors, who had responsibility to ensure the safety of depositors’
cash, take the bullet and bear the cost.
KCB and DTB will analyse Imperial Bank’s remaining
deposits and loans with the option of booking any good business into
their books. The Kenya Deposit Insurance Corporation (KDIC) will retain
the remaining business in a possible liquidation, the CBK said.
The CBK had previously said that Imperial Bank was
salvageable as it had portions of good business. The revival plan
depended on shareholders pumping in more cash, persons who had been
given the off-book loans providing security for the debt and depositors
converting some of their savings to shares.
The bank’s directors, who initially seemed to be on
the same page with the regulator, however started playing hard ball to
the extent of accusing the KDIC of failing to follow the proposed
restructuring plan, thus delaying the reopening.
On Monday, one of Imperial Bank’s executive
managers, Naeem Shah, denied claims that he blew the whistle on a fraud
scheme that its long-serving chief executive Abdulmalek Janmohammed run
for 13 years before his death in September, instead accusing CBK
officials of being part of the scheme.
Mr Shah, who had been appointed acting chief
executive following the demise of Mr Janmohammed, had been accused by
the CBK of either abetting or benefiting from the fraud. Mr Shah,
however, laid the blame on the company’s board of directors chaired by
Alnashir Popat.
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