A Chase Bank branch in Nairobi. Mauritius SBM's which is buying the
assets and liabilities of Kenya’s troubled lender, is under
investigation in its home country over a $195.15 million fraudulent loan
to a Kenyan consortium. FILE PHOTO | NMG
State Bank of Mauritius, which is buying the assets and
liabilities of Kenya’s troubled Chase Bank, is under investigation in
its home country over a $195.15 million fraudulent loan to a Kenyan
consortium.
The Mauritius lender is being investigated
by the central bank of Mauritius after it emerged that the security
offered for half the amount of the loan was not registered and that in
fact, the title could have been a forgery.
In January
this year, Kenya’s banking regulator accepted the sale offer from SBM
Holdings, the parent company of SBM Mauritius, to buy out the collapsed
lender, becoming its second bank acquisition after Fidelity Bank.
Mauritius
media report that forensic experts from Ernst & Young have been
investigating loan accounts at SBM after they were called in by the Bank
of Mauritius.
“At the moment, a line of communication
has opened between SBM Holdings and the Bank of Mauritius. This is to
help better understand how a financial deal of this scale could escape
the vigilance of two banking executves who worked on this loan project.
The Bank of Mauritius is briefed on a daily basis with regards to the
investigation progress,” L’Express weekly newspaper reported.
The EastAfrican has found out that one of the bank’s executives involved in the arrangement of the loan has resigned.
According to a source, the Kenyan consortium, whose identity has
remained a secret due to bank-client confidentiality, deals in wheat,
maize and drought relief supplies.
Apparently, half the
loan amount was guaranteed through deposits in US dollars, while the
difference, which was guaranteed through a mortgage, was not registered.
This meant it could not be executed exposing the SBM Mauritius unit to a
potential loss of more than $90 million.
According to
L’Express, SBM executives visited Kenya several times between May and
June in a bid to regularise the property registration.
However,
it was its external auditors Ernst & Young ‘s revelations that the
property title could have been a forgery that has now set off the alarm
bells for the bank over this transaction.
“It is
against the ethics of our profession to comment on the issues involving
our client,” said EY Mauritius managing partner Gerald Lincoln.
SBM
Bank in a statement refuted the media reports, saying it adheres to
strict compliance with credit and lending guidelines set by Bank of
Mauritius.
“Following a number of recent press articles
relating to facilities granted to a Kenyan-based entity, the board of
directors of SBM Holdings Ltd wishes to inform its shareholders and the
public in general that SBM Bank (Mauritius) Ltd reviews and monitors
significant exposures on a continuous basis. Despite certain factual
inaccuracies contained in the press articles, for reasons of banking
confidentiality, no further details can be disclosed,” the bank said.
Drop in share price
The
media reports resulted in a drop in the value of the bank’s shares on
the country’s security exchange, prompting SBM to release the statement.
However,
it advised shareholders and the investing public to exercise caution
when dealing in SBM Holdings shares at the Stock Exchange of Mauritius.
“The
risk appetite of SBM Bank (Mauritius) Ltd and its credit policies are
kept under review by its Credit Committee, which ensures strict
compliance with Bank of Mauritius credit and lending guidelines. SBM
Bank (Mauritius) Ltd notes that no breach of these guidelines has
occurred. At this point in time, neither SBM Bank (Mauritius) Ltd nor
SBM Holdings have any reason to expect a financial impact on the Group
arising from the facilities granted,” the bank said.
The
Central Bank of Kenya said it accepted SBM Holding’s binding offer on
January 4. It includes the acquisition of certain assets and matched
liabilities from Chase Bank.
“SBM’s binding offer
represents a viable proposal for the substantial resolution of Chase
Bank, for the benefit of depositors and the strengthening of the Kenyan
financial sector. It is expected that the transaction will be concluded
upon the execution and operationalisation of the offer,” CBK said in a
statement.
SBM’s offer is similar to the non-binding offer that was discussed with depositors on October last year.
It
is now expected that this transaction will ensure the transfer of 75
per cent of the value of deposits currently under moratorium and the
transfer of staff and branches of the existing CBLR operations.
SBM
Holding is a leading financial services group and the second largest
company listed on the Stock Exchange of Mauritius, with a growing
international presence currently extending to Madagascar, India and
Kenya, where SBM acquired Fidelity Bank in May 2017.
SBM
has a market capitalisation of approximately $600 million, with the
government of Mauritius as a significant shareholder, and total assets
in excess of $4 billion.
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