Probe turns to CBK staff linked to collapse of Imperial, Chase banks

Central Bank of Kenya
Central Bank of Kenya. FILE PHOTO | NMG 

As SBM Holdings officially takes charge of Chase Bank tomorrow, focus shifts to Imperial Bank takeover by KCB in September and investigations against Central Bank of Kenya (CBK) officials linked to the collapse of the lenders.

The Ethics and Anti-Corruption Commission (EACC) in May revealed that it was investigating former and current CBK officials for their role in the multi-billion shilling accounting fraud that ran down Imperial Bank.

Depositors and other stakeholders, who were affected by the collapse of the banks, are keen to understand which deliberate regulatory lapse contributed to their suffering.

A lobby group that represented a section of Imperial Bank depositors had called for speedy probe into the matter, noting that the investigations have taken too long to bear any fruit.

“We want to see to what extent the shareholders and CBK officials were involved.


“We have seen only directors charged in court; they are employees, not even directors,” said Mr Mahmoud Khambiye, the lobby head.

The lobby group said the depositors will sue CBK in the event they don’t get full recovery of their deposits, noting that the regulator should take full responsibility since a lapse in regulation is what led to the collapse of the bank.

The Director of Public Prosecutions (DPP) Noordin Haji had in the past also announced that an ongoing inquiry into the activities of Imperial Bank officials had extended to CBK officials.

Imperial Bank chairman Alnashir Popat, when he appeared before a parliamentary committee, claimed CBK officers were obstructing effective investigations into the mega fraud that precipitated collapse of the bank, and were pressing for its liquidation to cover their tracks.

He told the National Assembly’s Finance committee that officers have effectively manipulated the receivership process so as to deflect attention and protect themselves.


But Kenya Depositors Insurance Corporation (KDIC) chief executive, Mohamud Mohamud, in a phone interview with the Sunday Nation, said the fact that the bank is set to reopen proves the allegations about his institution were wrong.

“Future of KDIC is to resolve problem banks as a going concern, to mitigate bank failures, not dissolving it,” said Mr Mohamud, noting that their priority are depositors.

This week, KCB Group revealed that it expects to finalise a takeover of Imperial Bank by the end of September.

KDIC on July 31 obtained a 70-day extension of receivership, promising to once again conclude the process.

It was was placed under receivership on October 13, 2015 after CBK learnt of the fraud, which milked the lender of Sh34 billion.

On June 21, 2016, NIC Bank was appointed Asset and Liability consultant for the troubled lender.

The mandate of the NIC bank lapsed on April 13, 2017, during which NIC Bank made two disbursements totalling Sh10.78 billion to more than 5,500 depositors on behalf of KDIC.

During the period, it helped KDIC to collect about Sh5 Billion from borrowers.

Mr Mohamud said some progress on the loan recovery has been made, but said he cannot reveal the details since KDIC is in final talks with KCB, which is looking at the Imperial books.

But even as KDIC makes its final touches on the revival of the bank, the question when CBK officials, who failed to do their work, will be held to account remains unresolved.

The other bank that is under receivership is Dubai Bank. Its founder, Hassan Zubeidi, is fighting multiple cases relating to how he steered the bank.

Mr Hajji did not respond to our calls.

Earlier in February 2016, the former directors of Imperial Bank claimed in court papers that Abdulmalek Janmohamed, who passed away in September 2015, maintained an “inappropriate” relationship with former CBK Governor Njuguna Ndung’u.


Prof Ndung’u’s wife is named as having received gifts from Mr Janmohamed, as part of a calculated scheme to co-opt the banking sector regulator into abetting a massive fraud that crippled the lender.

Mrs Nancy Ndung’u was at one time reported to have billed Mr Janmohamed for her stay with a companion at a luxury resort in Thailand.

The lobby group stressed the pain they are undergoing, noting that they will not accept anything less than full payment of their deposits.