Chase Bank has been put into receivership for 12 months since “it was not able to meet its financial obligations,” according to Central Bank of Kenya.
This means that all 62 of Chase’s branches would be shut down until new management is put in place. CBK noted that the bank is at the time experiencing severe liquidity and capital deficiencies, which raised concerns that it was not likely to meet its financial obligation and might close, prompting tensions among customers.
Governor Patrick Njoroge revealed that the rumours spread on social media played a significant role in the bank’s problems, as flood of customers stomp the bank’s branches on Wednesday to withdraw their cash, and Chase could not deal with the withdrawals.
“The bank experienced liquidity difficulties following inaccurate social media reports and the stepping aside of two of its directors.”
He reassured people that the country’s banking system is not under threat even though Chase Bank is seemingly in turmoil. CBK announcement concerning the institution’s placement under the Kenya Deposit Insurance Corporation in a statement on Thursday and was posted at the bank branch window and also online.
Paul Njaga, the chief executive and deputy group MD, said their problem began last year due to their financial performance – the bank sank into a Sh742.80 million net loss from a profit of Sh2.31 billion in 2014.
Chase Bank group MD Duncan Kabui and chairman Zafrullah Khan resigned on Wednesday as customers streamed in for their money. Customers are worried as they question what will happen to their money as the branches of Chase Bank are not opened for business.
The CBK governor explained that:
“CBK appoints a receiver if, among others, an unsafe or unsound condition to transact, a bank has substantially insufficient capital or if there is a violation of any law or regulation.”
Therefore, KDIC will assume management control and conduct of the affairs and business of the institution licensed in 1996 but will follow appropriate strategy to resolve the issue within one year.
On the other hand, customers of Kenya’s Rafiki Bank – established by Chase Bank – are also concerned about what could happen to their money as Chase has gone on receivership.
In a press conference, Central Bank Governor Patrick Ngugi Njoroge addressed the issue, explaining that Rafiki will not be affected in the recent development. Chase Bank is the third bank to be put into receivership in the last year.
Imperial Bank experienced the same in October 2015 when CBk took control of it, handing its management over to the KDIC over “unsafe or unsound business conditions.”
Read Also: List of Banks in Kenya and their Addresses
Dubai Bank is still under receivership after it was taken over on August 14.