KISERO:CBK has failed Imperial Bank depositors

Central Bank of Kenya (CBK) Governor Patrick Njoroge speaks at a media briefing at his office at the CBK building in Nairobi on June 21, 2016. The Central Bank of Kenya (CBK) has appointed NIC Bank the asset and liabilities consultant for Imperial Bank, which is in receivership. NIC Bank will as a result take charge of compensating Imperial Bank depositors. PHOTO | SALATON NJAU | NATION MEDIA GROUP

What you need to know:

  • The governor should have been a bit more transparent about the number of suitors expressing interest in Imperial Bank’s good book and which of them had the best deal for depositors.

Truth be told, our Central Bank does not have the capacity to handle collapsed banks. The governor, Dr Patrick Njoroge, may have the very best of intentions, but in handling the case of Imperial Bank, he has badly fumbled, in the process subjecting depositors to misery by denying them access to their savings for more than eight months.

Let me give my reasons for using harsh words for a man widely regarded as one of the most popular and highly regarded public servants.

I accuse him of deviating from the clear path which he had put out to resolve the problem of Imperial Bank, which 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, a promise to come back with a solution for the treatment of bond holders.

To date, we do not know what became of the due diligence process by KCB and DTB. We do not know whether or not these banks made an offer to buy Imperial’s loan book, the terms they offered for the good book, or the circumstances under which they left Imperial.

Indeed, we were all surprised when KCB quietly abandoned the due diligence process on Imperial’s loan book to end up being appointed as “managers” of yet another troubled bank, namely, Chase Bank Ltd, to do the very same things it failed to do at Imperial Bank.

Depositors waited with bated breath for the month of March this year to see the outcome of the five-pronged strategy the governor had outlined in December, 2015.

The announcement in March was anticlimactic. As it was to turn out, the only tangible achievement to have happened during the waiting period was the payment of Sh1 million to the depositors.

There was no mention of the results of the due diligence reviews on deposits and loans, which KCB and DTB had been mandated to do.

Neither was there any mention of a solution for treating bond holders, as had been promised by the December 2015 statement.

Instead, 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”.

I almost lost hope on behalf of a friend who has millions stuck in Imperial Bank and who had been literally counting days to March, having believed the promises and public assurances of the governor that the bank would reopen its doors.

I reminded my friend that two terabytes of data of the Panama papers took 600 journalists a whole year to read through.

Ever the optimist, Dr Njoroge asked depositors to wait another three months, estimating that significant progress would have been made by the end of June.

Yesterday, he pulled yet another rabbit out of his deep hat, this time with NIC Bank as the solution to the Imperial Bank conundrum.

In truth, the mandate which has been given to NIC Bank under the new arrangement announced yesterday is not very different from what KCB and DTB were supposed to have done when they were engaged under the agreement of December 2.

But the semantics have changed. Instead of being called “manager”, which is the term used to describe KCB’s role at Chase Bank, NIC Bank has been given a high-sounding name: “assets and liabilities consultants”.

The governor should have been a bit more transparent about the number of suitors expressing interest in Imperial Bank’s good book and which of them had the best deal for depositors.