Spire Bank crisis needs swift CBK intervention


A Spire Bank branch in Nairobi. FILE PHOTO | NMG

The financial crisis that has engulfed Spire Bank requires swift intervention from the Central Bank of Kenya (CBK) to avoid fears over the health of Kenya’s banking sector.

Over the last couple of years, Spire Bank’s accumulated losses of up to Sh8.4 billion have wiped out shareholder funds, which now stand at negative Sh1.8 billion. It remains in breach of CBK minimum capital levels, putting shareholders investments and Sh4.79 billion customer deposits at risk.

This state of affairs does not sit well with the latest push by the banking regulators to enhance stability in the sector.

The CBK has recently shepherded consolidation, leading to acquisition of weak lenders such as Jamii Bora Bank and National Bank (NBK) by Co-operative Bank and KCB Group in that order.

To survive, Spire Bank requires additional capital to resume growing its lending book, and this can only happen through sale of the lender to credible strategic investors.

Already, teachers through the Mwalimu National Sacco sank at least Sh4 billion of their hard-earned savings into the struggling lender in a rushed purchase of the bank from businessman Naushad Merali in 2015.

The CBK has a duty to protect these innocent investors who are owed an explanation on whether they were sold to a dead bank.

The ongoing parliamentary probe must seek to establish if the purchase was above board.

Culprits must be punished if breaches are unearthed.

Depositors and investors in Kenya were rattled five years ago when the CBK took control of three mid-sized lenders after they failed to meet their statutory obligations.

Out of the three lenders placed under receivership in 2015 and 2016, Dubai Bank is facing liquidation.

However, Chase Bank and Imperial Bank had their good loans and deposits transferred to State Bank of Mauritius (SBM) and KCB respectively.

These events undermined depositors’ and investors’ confidence in small banks.

Yes, Spire Bank has committed to bringing on board strategic investors. We have been here before, and the strong hand of the CBK should push through a deal and correct the mess in Spire Bank.