Editorials

Full disclosure of what led to Chase Bank closure vital

Summary

  • Since the placing of the bank under receivership on Wednesday last week, a lot of information has filtered through the public- some as matter of fact and others contested, given how such details have come to light.
  • At what point did Deloitte find out about the undisclosed directors loans and the under provision of the non-performing loans, seeing as it were they have been auditing the bank for more than a year?

The question of what really brought down Chase Bank will most likely take weeks or months to come to light.

Already, the Directorate of Criminal Investigations has opened a file on the matter and one would hope that Central Bank of Kenya is also investigating to find out what transpired and, if, as initially suggested that there was creative accounting on the part of management, how far this had gone.

Since the placing of the bank under receivership on Wednesday last week, a lot of information has filtered through the public- some as matter of fact and others contested, given how such details have come to light.

What is clear, though, is that there is so much that happened prior to the bank going under that the public needs to know- largely given the huge number of depositors- especially small and medium- sized businesses that banked with Chase Bank who are now suffering from a mistake not of their own making.

READ: How Deloitte audit row caused a run on Chase Bank

First, the controversy surrounding the publishing of the financials where the bank published two sets of financials. The public needs to know what the trigger was. And did this precipitate the resignation of the chairman board of directors and the chief executive? If yes, what was their role?

Undisclosed director loans

At what point did Deloitte find out about the undisclosed directors loans and the under provision of the non-performing loans, seeing as it were they have been auditing the bank for more than a year? Was this information passed to the board of directors, who are legally responsible for keeping proper and fair books of accounts and at what point?

More importantly, was this information passed to the shareholders, who appoint the auditors to keep an eye on their behalf, and to the regulator as last course of action?  And, if yes, what action did each of the concerned parties take. 

Central Bank of Kenya, as the lender of last resort, carries an obligation to ensure that the market operates seamlessly and where this is disrupted it must move in to smoothen by offering credit to institutions that are struggling.

Allegations that on the eve of the collapse, the Chase Bank management pleaded for a Sh10 billion loan to sort out liquidity but was denied calls for more disclosure on the part of Central Bank on the basis of such a refusal, seeing as it is now that this is a matter of national importance.

What informed the Central Bank’s decision not to play one of the most critical roles of maintaining stability in the industry by offering Chase Bank a rescue package?   

The public, but more so the depositors and creditors of Chase Bank, require no less than a full disclosure of what happened in the two weeks preceding the closure of the bank. Only by doing so will the public rest easy on the matter.