Treasury settles on merging NBK and two other banks

State-owned banks will be consolidated into one or two institutions to make them stronger in coming months, Treasury secretary Henry Rotich has said.

The National Bank of Kenya (NBK), Consolidated Bank and the Development Bank of Kenya which are majority-owned by the government or quasi-state institutions are the targets of the consolidation.

Mr Rotich said a consultant had been appointed and was currently working on the modalities of the consolidation. The expert is expected to advise the Treasury on the way forward soon.

“We are making progress on the issue of consolidation because we now have a consultant who will soon be advising us on how to move. We expect to consolidate the state banks into one or two banks very soon,” said Mr Rotich.

The CS further said that voluntary mergers and acquisitions in the banking industry will be encouraged as a way of strengthening the ensure institutions.

Mr Rotich was speaking at a press conference called by the Treasury last Friday in Nairobi to address concerns on the state of the banking industry following the collapse of Chase Bank.

At the same meeting, Central Bank of Kenya (CBK) governor Patrick Njoroge said that market-led consolidation of banks would be a positive development.

“We welcome market-led mergers and acquisitions but we are not going to force it. We want it to be voluntary,” said Dr Njoroge while giving reasons behind the closure of Chase Bank.

READ: Banking sector set for mergers as lenders eye business growth

The governor said he hoped the crisis which has been exposed in some institutions so far will give some in the banking sector the impetus to consolidate.

“You can have new shareholders coming in as strategic investors, people with know-how and experience who can contribute to innovation in an institution,” said Dr Njoroge last Wednesday.

The governor said that the CBK would not leave criminals to roam free in the banking system and cause the kind of problems experienced in several banks recently.

“We will not tolerate rogue bankers; there is no room for people who are stealing depositors’ money; we will not take them through a kangaroo court but we will take action,” said Dr Njoroge.

As of last Friday, the Directorate of Criminal Investigation had began investigations into the culpability or otherwise of the top executives and directors of problem banks following an order from Inspector-General of police Joseph Boinnet.

Those lined up for interrogation were NBK’s chief executive Munir Mohammed, executive director Boniface Biko, chief credit officer George Jaba, ICT director Mohammed Abdalla, acting chief finance officer Wycliffe Kivunira and the bank’s chief finance officer Chris Kisire who had been suspended a year before his other colleagues.

Others to be interrogated were from the collapsed Chase Bank including former chairman Zafrullah Khan, commonly referred as Zafa, and former group managing director Duncan Kabui.