The Central Bank of Kenya has agreed with the Kenya Deposit Insurance Corporation (KDIC) to have fallen Chase Bank (CBK) liquidated, following several audit gaps reported early this year.
Chase Bank collapsed in 2016 and placed under receivership on April 7, 2016, with KDIC being appointed as the receiver by CBK.
On April 20, 2016, KDIC appointed KCB Bank Kenya Limited (KCB) as Manager of Chase Bank Limited (In-Receivership) (CBLIR), with the concurrence and approval of CBK.
“This was intended to ensure the continued operations of CBLIR, leveraging on KCB’s credentials as a strong bank with a solid brand, adequate human resources, and wide experience in the country,” said CBK.
CBK reports that at least 162,970 deposit accounts equivalent to 97 percent of the depositors’ accessed their funds in full, following the management by KCB.
On August 17, 2018, 75 percent of the value of deposits at Chase Bank and 75 percent of the value of assets were carved out and transferred to SBM Bank Kenya Limited (SBM Bank), a subsidiary of SBM Holdings Limited.
The transaction enabled CBLIR depositors to access a significant portion of their frozen deposits. Following the carve-out and transfer, KCB’s management contract ended and KDIC continued managing the remaining 25 percent of the value of deposits along with other assets and liabilities that remained in CBLIR.
KDIC commissioned an external auditor in 2018 which was completed in September 2020.
“CBK noted a number of gaps in the report and engaged KCB and KDIC. A significant number of the gaps were subsequently resolved,” CBK said in a statement on Friday.
In February 2021, CBK requested KDIC to resolve all the pending gaps in 60 days.
On April 7, 2021, KDIC submitted the Receiver’s Report to CBK recommending that CBLIR be liquidated. The report indicates that considering the weak status of CBLIR’s financial position, liquidation is the only feasible option.
“CBK has assessed the recommendation by KDIC, and considered that liquidation would facilitate the orderly resolution of the residual assets and liabilities of CBLIR in accordance with the Laws of Kenya, to protect the interest of CBLIR depositors, its creditors, and the wider public interest. Subsequently, CBK has today, April 16, 2021 appointed the KDIC as liquidator of CBLIR,” said CBK.