Dubai Bank Kenya placed in receivership for a year

Central Bank of Kenya (CBK) has placed Dubai Bank Kenya under a receiver for a period of twelve months in response to “serious cash-flow problems”.

In a statement released Friday afternoon, CBK announced it has appointed the Kenya Deposit Insurance Corporation (KDIC) as a receiver “in the interest of (Dubai Bank’s) depositors, creditors and members of the public”.

CBK said Dubai Bank Kenya has been experiencing liquidity and capital deficiencies which raised concerns that it will most likely not be able to meet its financial obligations as and when they fall due.

“CBK has closely monitored Dubai Bank’s daily cash reserve ratio from July 14, 2015 when the bank began breaching its daily cash reserve ratio requirements,” the statement reveals.

“(We have) also been in contact with Dubai Bank to attempt to redress the situation, but there has been no compliance by the bank.”

The non-compliance has to date attracted a total penalty of Sh5.4 million.

“Owing to the deteriorating cash reserve ratio position and Dubai Bank’s failure to honour financial obligations, including Sh48 million due to Bank of Africa Kenya, the CBK is of the opinion that the bank will most likely fail to meet its financial obligations in the normal course of business.”

Section 43(2) of the Kenya Deposit Insurance Act, 2012 requires CBK to appoint the KDIC as a receiver of a bank, if, among others

• an unsafe or unsound condition to transact exists;

• a bank is likely to fail to meet its financial obligations,

• a bank has substantially insufficient capital or

• if there is a violation of any law or regulation.

The bank has been engulfed in drama in recent years, with some of its troubles including a managing director who fled the country to avoid CBK questions on his role in a dodgy deal; a chairman arrested and accused of obtaining his citizenship through fraud; claims it hosted a secret bank account used to loot Sh1bn from Mumias Sugar and court battles with Kwanza Estates and Erdemann Properties, among others.