The Central Bank of Kenya (CBK) has revealed that a Chase Bank director had irregularly lent himself Sh7.9 Billion of depositor's money, prior to the financial crisis that saw the troubled lender placed under receivership.
Worse still, the director reportedly advanced himself the humongous loan beyond the set regulatory limits without any registered collateral. The Sh7.9 Billion loan was over 25 per cent of the total capital limit set in the Banking Act.
The credit to the director, whom auditors called a significant shareholder, was part of other huge loans given to insiders at Chase Bank, that left a trail of financial ruin across the country.
CBK unearthed that insider loans — money advanced to directors, shareholders, associates and employees of a bank — stood at Sh13.62 Billion last year against the Sh5.72 Billion Chase Bank had reported on March 31.
The multi-billion insider borrowing was way more than the Chase Bank's total shareholder funds (equity), which stand at Sh11.19 Billion.
Before being put under receivership on Thursday, the bank had dismissed its chairman Zafrullah Khan and Group Managing Director Duncan Kabui after the conflicting financial reports that heightened anxiety on social media, occassioning an unprecedented withdrawal of funds from the bank by customers.
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On Wednesday, reports were shared on social media indicating that the bank would be closed down hence hundreds of people made withdrawals. CBK Governor Dr Patrick Njoroge dismissed the reports as malicious rumours that eventually harm the bank.
The bank was placed under receivership on Thursday and all it's branches and ATMs shut down. The CBK then appointed the Kenya Deposit Insurance Corporation (KDIC) to assume management control and conduct of the affairs and business of the bank for one year.
Three banks have now been put under CBK's control in the past year. In July, the regulator ordered closure of Dubai Bank and thereafter in October Imperial Bank was also shutdown.
Read also: Chase Bank Placed Under Receivership
