Imperial Bank bondholders and fixed depositors set for slashed rate payout

Central Bank of Kenya (CBK) Governor Patrick Njoroge Thursday said investors in the collapsed Imperial Bank’s Sh2 billion bond will be refunded cash even though not at the rate of return promised in the information memorandum. Holders of fixed deposit accounts will also miss out on interest payments.

Dr Njoroge, however, told MPs that the CBK is pursuing perpetrators of the scam, denying claims of inaction.

“There is no softness, but we need to put together a solid case that can stand legal scrutiny,” he said.

The governor disclosed they were building a case against senior managers of the bank who authorised falsification of financial statements presented to CBK even as MPs feared culprits will flee the country.

“The Banking Act is clear on misrepresentation of accounts, which is a criminal act,” said Mr Njoroge.

MPs noted that the sentence of three years for misrepresentation was lenient, urging the CBK officials to bring recommendations to be passed into law.

The CBK has already sued the bank’s acting managing director Naeem Shah and chief financial officer James Kaburu for colluding with the main perpetrator, the late Abdulmalek Janmohammed.

“Our fear is that you may have a strong case but not have anyone to take to court and we have seen this before in the case of Triton, Trade Bank among others,” said chairman of the parliamentary Finance Committee Benjamin Langat.

READ: CBK urged to hasten prosecution of Imperial Bank directors

Kisumu East MP, Shakeel Shabbir, a member of the committee, claimed some of Imperial Bank’s directors had already fled the country.

CBK has also sued Dubai Bank’s directors for the collapse of the small lender three months ago. The regulator, however, failed to sue its directors until its collapse despite accusing the lender of falsifying its accounts.

Dubai Bank’s chief executive, Binay Dutta, fled the country earlier this year as the bank sunk deeper into trouble.

Dubai Bank had been accused of cooking its books twice in the last three years. In June the CBK said the bank had lied that its liquidity ratios stood at 27.1 per cent as at the end of last year and 21.4 per cent in March while investigations showed the actual figure was 9.6 per cent.

Under Kenyan laws, banks must maintain a liquidity ratio of not less than 20 per cent. The bank has been accused in court filings of under-providing for its bad loans resulting in its declaration of false profits.