The Central Bank of Kenya (CBK) plans to seize and sell off assets of individuals linked to the collapse of troubled lender Chase Bank to cover a Sh19 billion deficit owed to customers as deposits.
CBK governor Patrick Njoroge and the Kenya Deposit Insurance Corporation (KDIC) chief executive officer, Mahmoud Mohamed, in a joint briefing Friday announced that Chase Bank customers will access 75 per cent of the Sh76 billion deposits locked in the troubled lender in staggered phases over a period of three years.
The process for releasing the funds to about 3,100 affected depositors will kick off “in a matter of weeks”, they said, without giving a more specific timeline.
The payout plan comes after the recent sale deal where Mauritian lender SBM Holdings made a binding offer to take over Chase Bank.
In the transaction, Dr Njoroge said, 25 per cent or about Sh19 billion will remain with Chase Bank as part of other “assets and liabilities”.
This means that customers will not have access to all their funds as the CBK seeks to have bank’s managers and owners who are implicated in the bank’s woes prosecuted and their assets attached. The regulator is already in court pursuing the disgraced directors’ and shareholders’ assets.
“We will have to get as much from the shareholders or those that borrowed or those that took money out of the bank,” said Dr Njoroge. “We will need to get the assets, we freeze them, get them back and sell them and provide that as new liquidity or as new assets that can be distributed for the depositors… The point is we have not given up. With the objective of raising as much of the value and giving it back to the rightful owners who are the depositors we will use all these elements.”
In the ongoing case before the courts, the CBK has been pursuing Chase Bank founder and former chairman Zafrullah Khan and eight other former senior managers and directors at Chase Bank and its related companies to recover Sh14.9 billion the regulator says was lost through irregular insider loans and property acquisitions.
But the bank’s founder has insisted that the CBK has no evidence of any wrongdoing on his part. The initial payouts will start after the planned execution of the recent binding offer by SBM to take over Chase Bank.
Under the staggered approach, 18.75 per cent of the deposits will be placed in current accounts operated by the depositors.
Another 18.75 per cent will be placed in savings accounts of the depositors, earning seven per cent interest.
The rest of the 37.75 per cent will be available annually in term deposits over a three-year period, earning interest of seven per cent.