Justice Eric Ogola has faulted the regulator for failing to act on Dubai Bank’s problems despite knowing some of the regulations the troubled lender was flouting.
The High Court has turned its guns on the Central Bank of Kenya (CBK) over negligence it says has led to the fall of Dubai Bank.
Justice Eric Ogola has faulted the regulator for failing to act on Dubai Bank’s problems despite knowing some of the regulations the troubled lender was flouting.
The judge fired at the CBK while delivering a ruling that stopped the regulator and the Kenya Deposit Insurance Corporation from winding up Dubai Bank, arguing that the move was premature.
The judge held that evidence presented in court showed that the CBK’s dissolution of Dubai Bank just 10 days after placing it under receivership appeared to be a ploy by the regulator to cover its tracks and avoid blame for failing to act on breached regulations.
The CBK ordered Dubai Bank’s liquidation in August after an audit report showed that it had flouted regulations that outlaw parallel banking.
The report also showed that the bank was operating with a core capital of Sh959 million, below the minimum Sh1 billion set by the regulator.
“The CBK has slept on the job and its supervisory powers have been abused. Dubai Bank’s problems are not recent. The CBK is trying to shield its lack of inspection and is attempting to escape scrutiny.
“The liquidation of Dubai Bank is suspended by order for 60 days. The CBK is to consider the proposal by Dubai Bank,” the judge ruled.
Supplies firm Richardson & David moved to court last month seeking to stop the lender’s liquidation. The firm is Dubai Bank’s second largest depositor and had saved Sh142 million when it was shut in August.
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