Bank deposits insurer KDIC a failure

Hapless citizens have not had access to their deposits for three years. FILE PHOTO | NMG 

By JAINDI KISERO

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We still can’t tell whether plans by the Director of Public Prosecutions, Mr Noor Haji, to charge the Deputy Chief Justice, Ms Philomena Mwilu, with graft will see the light of day.

What I will be following keenly are allegations relating to the troubled Imperial Bank that has been ...
under the management of the Kenya Deposits Insurance Corporation (KDIC) for in excess of three years.

If the case proceeds and depending on the individuals Mr Haji parades as witnesses, it may just present the depositors of Imperial Bank a rare glimpse of shenanigans that have been going on even as the doors of the bank continues to be closed.

The spotlight will have been put on one of the darkest holes in our financial sector- KDIC. Indeed, KDIC does a poor job at defending the interests of depositors of fallen banks.

In this country, you put your hard-earned savings in a bank believing that because the institution is under constant supervision by the Central Bank of Kenya that renews its licence every year, it must be safe.

The shenanigans around the Imperial Bank case raise the question: How safe are the assets of a fallen bank under the management of KDIC?

It is a pertinent question because as a depositor of a fallen bank, you wake up one morning to read in newspapers that assets of the bank- especially property have changed hands. But you don’t know whether you will ever get your money back after disposal of these assets. We still remember the controversy surrounding the case of Integrity House.

For a long time, depositors of the fallen Trust Bank- also under the management of KDIC on behalf of depositors knew that the property belonged to the bank and cherished the view that its sale would boost their fortunes. It did not happen. There is a strong case indeed for reforming KDIC.

In the first place, it must be made to operate with more transparency and disclosure, especially to depositors of fallen banks. I still hold the view that our Central Bank does not have the capacity to handle collapsed banks.

In the Imperial Bank case, and going by the statements and promises which the governor, Dr Patrick Njoroge, has been giving to depositors, it is clear that even though he may have the very best of intentions, he has done a poor job at helping depositors.

Mark you, these hapless citizens have not had access to their deposits for three years.

Imperial Bank closed its doors in October last year. On December 2, 2015, the governor put out a statement, laying out a clear, five-pronged strategy. First, appoint Kenya Commercial Bank (KCB) and Diamond Trust Bank (DTB) to assist in the process of paying deposits of up to Sh1 million.

Second, KCB and DTB to take a due diligence review of all other deposits and loans, Third, by March 2016, KCB and DTB would table the loans and deposits they were prepared to buy.

Fourth, the banks would then give the terms under which they were prepared to buy those assets.

Finally, he promised to come back with a solution for the treatment of bond holders.

Many months later, the governor went on a completely new tangent and started trying to dazzle depositors with new details about how auditors had unearthed “intricate and close connections” between the bank’s depositors which needed to be subjected to a thorough scrutiny by forensic auditors.

It was clear that a quick resolution to the problems of Imperial Bank would take much longer as the focus of the governor had shifted, from selling the good book to KCB and DTB as quickly as possible and to allow depositors to gain access to their savings, to chasing fraudulent activity.

Even the semantics had changed, with the governor now using phrases like “unearthing 700 accounts of interest”, buried in 22,520 “high priority transactions”, and dazzling depositors with complex jargon about how investigators have uncovered evidence buried in “1.2 terabytes of data."

READ: No end in sight to Imperial Bank depositors’ wait as cases drag on

Months later, and as the depositors continued to endure pain and suffering, governor Njoroge came out with yet another strategy, this time presenting NIC Bank as the solution to the Imperial Bank conundrum.

Instead of being called “manager", NIC were brought in to be “assets and liabilities consultants”.

Three years down the line, we are back to an ‘expression of interest’ by the Kenya Commercial Bank.

Why couldn’t we allow KCB to buy the good book at the time they were being invited into Imperial Bank more than two years ago?

Meanwhile, I gather that the plan to get KCB to merge with the National Bank of Kenya is back on the agenda and that meetings have resumed at the Treasury.