Kenya's Imperial Bank in receivership after possible "malpractices" - CNBC Africa

Kenya's Imperial Bank in receivership after possible "malpractices"

East Africa

by Duncan Miriri and Drazen Jorgic 0

Second Kenyan bank put under management since August. Photo: Wikimedia

NAIROBI, Oct 13 (Reuters) - Kenya's central bank has called in a government agency to take control of Imperial Bank Ltd, citing "unsafe or unsound business conditions", and the agency said it would investigate possible "malpractices".

Imperial Bank is the second bank in Kenya to be put under management since August, when Dubai Bank Kenya Ltd, a very small lender, was put in receivership after liquidity problems.

Privately held Imperial Bank, which appointed a new managing director in September after his predecessor died, was ranked 19 out of Kenya's 45 lenders at the end of 2014. On June 30 this year, it reported assets of 70.3 billion shillings ($684 million).

The Central Bank of Kenya said it appointed the Kenya Deposit Insurance Corporation (KDIC) to manage Imperial Bank for 12 months after Imperial's board alerted it to "inappropriate banking practices that warranted immediate remedial action."

"The CBK has become aware of unsafe or unsound business conditions at Imperial Bank Ltd," the central bank said, adding that KDIC would present a resolution plan within 12 months.

KDIC, which said it was acting as receiver, said the bank's normal operations were suspended except for collecting loan repayments or other payments and branches would kept open for that purpose. It told depositors to be patient.

"KDIC shall immediately undertake due diligence to ascertain the veracity of irregularities and malpractices and determine the most appropriate resolution mechanism in the shortest time possible," it said, adding it was working with Imperial's board.

Trading and listing of Imperial Bank's 2.0 billion shilling corporate bond, scheduled for Tuesday, was suspended, the Capital Markets Authority said.

Imperial Bank could not be reached for comment.

A central bank statement said it "assures members of the public that Kenya's banking sector remains safe and robust."

A branch of Imperial in central Nairobi was shuttered on Tuesday afternoon, with several customers gathering at the door.

"I have to pay rent otherwise I will be locked out of the hostel," student Al-Amin Mandhry, 18, said. "They refused me to enter, so now I don't know where to go."

Others said the bank's cash machines were not working.

"Given the size of Imperial Bank, I don't think it will have a knock-on effect on the entire industry," Francis Mwangi, head of equity research at Standard Investment Bank, said. But he noted that this came soon after the Dubai Bank Kenya case.

"It raises the question of whether CBK has now become more vigilant and aggressive and whether we will see CBK raise more questions which could lead to more banks being put under the spotlight," he said.

The Ugandan central bank, the Bank of Uganda, said it had brought Imperial Bank Uganda Ltd, in which the Kenyan bank has a majority stake, under its management in response to the Kenyan initiative. It said the bank's operations would continue normally but under central bank control.

($1 = 102.8000 Kenyan shillings) (Writing by Edmund Blair; Editing by Jane Merriman and Ruth Pitchford)