Imperial Bank depositors demonstrate outside the bank’s headquarters in Nairobi in 2016. PHOTO | FILE
The Central Bank of Kenya is facing a legal battle over the closure of the troubled Imperial Bank that pushed thousands of depositors into financial distress.
The EastAfrican has learnt that Central Bank Governor Patrick Njoroge and his deputy Sheila M’Mbijiwe are set to be cross-examined in court as key witnesses on the legality of their actions that placed the mid-tier bank into receivership six years ago.
This is part of a suit filed by Imperial Bank against Janco Investment, a firm that was owned by Imperial Bank former chief executive Abulmalek Janmohamed, who has since died.
Law firm Ahmednasir, Abdikadir and Company Advocates argues that the process of placing Imperial Bank under statutory management was unlawful.
Missing board
According to the law firm, Dr Njoroge was in Peru at the time, and Central Bank did not have a board as the tenureof the directors had expired when Imperial Bank was put under receivership on October 13, 2015.
“Consequently, in the absence of a board of directors at the material time, the governor of the Central Bank of Kenya Dr Njoroge was incapable of exercising its powers under the Banking Act of Kenya, Chapter 488 of the Laws of Kenya and the Central Bank Act of Kenya, Chapter 491 of the Laws of Kenya,” the law firm says
According to the law firm, CBK proceeded to close down Imperial Bank despite the lender being in a solid financial position and having a healthy loan book with no history of financial crisis.
Urgent matter
The matter, which is certified as urgent by Justice Alfred Mabeya, is slated to be heard in May 2022.
“The witnesses being summoned are senior public servants who need to be informed of court dates in advance so that they can clear their diaries.”
Njoroge and KDIC chief executive Mohamud Ahmed Mohamud did not comment on the matter as our e-mailed questions remained unanswered by the time of going to press.
Imperial Bank was placed under receivership after the discovery of illegal and fraudulent activities by bank directors that resulted in the loss of excess of $312.5 million.
The lender collapsed with outstanding claims in excess of $758.92 million.
Prior to its placement under receivership, Imperial Bank’s net profit had risen over five consecutive years to $17.94 million in 2014, from $7.9 million in 2010. The bank’s loan book was $322.05 million, from $99.55 million, in the same period, according to its 2014 annual report.
Customer deposits had increased to $501.16 million from $141.33 million while lender’s liquidation position comprising cash, short term funds and government securities had increased to $235.26 million from $69.64 million in the same period.
Its liquidity ratio was 44 percent, more than the statutory minimum of 20 percent. he lender had accumulated assets worth about $100 million as of September 30, 2015, according to court documents.
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