National Bank under microscope as Kenya steps up sector clean-up - CNBC Africa

National Bank under microscope as Kenya steps up sector clean-up

East Africa

by Reuters 0

National Bank under microscope as Kenya steps up sector clean-up. Photo: Flickr.

Six executives of a Kenyan bank sent on leave last month pending an internal audit face questioning by police on Monday, as authorities respond to persistent concerns about the health of the country's banking sector.

The board of mid-sized National Bank sent chief executive Munir Ahmed and five others on compulsory leave in late March, warning on 2015 earnings after bad loans mounted. Ahmed at the time called the board's response an overreaction.

The sector came under the microscope on Thursday when Chase Bank Kenya Ltd, another mid-sized lender, was put into receivership for failing to meet its obligations and following a run on deposits, becoming the third bank in nine months to be placed under central bank control.

Central bank governor Patrick Njoroge, who has introduced more stringent reporting requirements for banks since being appointed in June, said on Wednesday there were no "systemic problems" in the sector.

Police said they took statements on Saturday from Zafrullah Khan and Duncan Kabui, respectively Chase Bank's former chairman and former group managing director.

Neither man could immediately be reached for comment by Reuters.

"I'm expecting the National Bank people today. The Chase Bank people, we had them on Saturday," Ndegwa Muhoro, director of the police's Criminal Investigations Department, said on Monday, adding detectives were working closely with the central bank.

National Bank said on Friday it would cooperate with police investigations.

Chase Bank's Khan and Kabui left their positions last week after a restatement of results that showed auditors had flagged concerns about loans of 16.6 billion shillings ($164 million).

A third lender, Imperial Bank, is still in receivership after it was taken over last October, just two months after a smaller one, Dubai Bank, was placed under central bank control.

Njoroge said on Sunday the central bank would provide financing to any lender or microfinance institution that was facing liquidity problems through no fault of its own.

The central bank has also said it expects consolidation in Kenya's banking sector that will lead to stronger institutions.

A number of foreign and local investors were keen on acquiring Chase Bank, Njoroge said on Sunday.

($1 = 101.0000 Kenyan shillings)