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Opinion & Analysis

CBK shouldn’t ignore Chase Bank clients

Customers at a Chase Bank branch. FILE PHOTO | NMG
Customers at a Chase Bank branch. FILE PHOTO | NMG 

I think the Central Bank of Kenya (CBK) has done a very poor job of communicating to depositors about the fate of troubled Chase Bank, especially on the progress of plans to sell the bank to new investors.

We must not forget that the bank’s depositors have not had access to their hard-earned savings since April last year. Yet as things stand, the depositors do not even have information as rudimentary as the number of suitors who are still in the race to buy the bank.

The bank was closed and several audit quality reports have been produced. But the depositor has been kept in the dark throughout this period.

When there is such a huge gap in the flow of information - where stakeholders have no clue of what is going on - the vacuum gets with filled rumours, uncertainty and mental torture.

Right now, the talk out there is that most of the shortlisted investors who had initially expressed interest in buying the bank have walked out of the negotiations and that the plans to sell the bank have more or less stalled.

The veracity or not of these rumours and claims notwithstanding, the situation is a perfect illustration of how citizens react when they are subjected to endless waiting and suffering.

Which begs the question: Do people in power appreciate the suffering that depositors at fallen banks endure when all they do is dither and procrastinate on decisions that affect the lives of bank depositors so profoundly?

As a bank depositor, you take your hard-earned savings to a bank believing that, because it is under constant supervision by the CBK and since it is usually granted a licence to operate by the regulator every year, your money is safe.

Central banks exist to protect and serve the interests of depositors - especially the unsophisticated folks who don’t have the skills and knowledge to read published accounts of banks- to separate weak banks from strong banks and to pinpoint the banks they should not entrust with their meagre savings.

In our context - and as demonstrated over and over again by the long and tortuous journey the depositor of a troubled bank in Kenya must walk before he can access his savings - the regulator does not approach his fiduciary responsibility of protecting the depositor with a sense of fairness and justice.

The moment a bank closes its doors, it seems that the regulator morphs into a power above the people, to be lobbied, petitioned and propitiated for favours.

Where the regulator tends to concentrate and spend most time, resources and energy is in legal battles and engaging consultants and in the process spending billions in legal and consultation fees. The depositor is at the bottom of the heap.

When the central bank announced for the first time that it was putting out invitations for expressions of interest for Chase Bank, the Press statement carried a timetable showing that short-listed investors would be required to meet and engage depositors on June 26. Nothing of the sort has happened.

The shareholders and the large European long-term lenders of the bank were also supposed to meet shortlisted bidders. They have not.

Several months ago, a shareholders’ committee led by Ms Muthoni Kuria approached the CBK and requested information on the financial status of the bank. There was no response. Everybody is in the dark.

The CBK needs to be more transparent because the depositor who has not had access to his savings for months needs information to decide which of the restructuring plans being offered by strategic investors will give them full recovery of their deposits.

Presently, many depositors I have spoken to fear the prospect of a process where the bank is divided into a good and bad bank, and where assets of the bad bank are stripped over a protracted period.

If the CBK persists in giving no information to stakeholders, I see the Chase Bank saga going to court. The lawyers will mint billions as the depositor continues to suffer.

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