Category Archives: CBK

SBM takes Chase Bank deposits to conclude speedy receivership

EDIT August 24 via SBM Bank Kenya: If you have been transacting with the bank in the last 60 days, you have 6 months to update your documentation #KYC.

 

EDIT August 15 2018:  As part of the transition of Chase to SBM, cheques and EFT’s will be temporarily halted from Thursday 16th August to resume at new SBM counters on Monday, August 20, 2018. Also, it appears, Chase Bank customers will be required to fill out new account opening forms for personal & corporate accounts, wire transfers, chequebooks, cards (debit & credit) and to access digital banking services. This is in line with “know your customer” and to condemn the identity, authenticity and validity of Chase customers being integrated into SBM.

Chase debit /ATM cards cease to work on Friday, August 17 and customers have been asked to collect new SBM cards from their “home” branches. Chase Bank chequebooks also cease effect on that date and customers will be issued with new SBM Kenya chequebooks, with the first being free of charge). Users of the popular Chase Bank Mfukoni app will be prompted to update it and to download a new SBM Kenya app – which has familiar features including airtime purchase, utility bill payments, account statements, chequebook requests and Mobile2bank / M-Pesa transfers of up to Kshs 500,000 ($5,000).

April 18 2018: Yesterday an agreement was signed to conclude the transfer of 75% of the deposits held in Chase Bank that was placed under receivership in April 2016, to the State Bank of Mauritius (operating as SBM Kenya), with the balance remaining at Chase (in receivership) that is being managed by the Central Bank of Kenya (CBK) and the Kenya Deposit Insurance Corporation (KDIC).

The agreement enables customers of Chase Bank to immediately access 25% of their deposits that will be placed in current accounts at SBM, and another 25% that will be placed at savings account at SBM that will earn 6.65% interest per annum. The balance of funds being transferred from Chase will be placed in fixed deposits at SBM that mature over three years with one-third becoming available to Chase depositors on the anniversary date of the agreement for each of the next three years, in what CBK states this represents a substantial resolution of for the depositors of Chase Bank.

SBM Kenya is part of SBM Holdings that is controlled by the Government of Mauritius and has $5.8 billion assets and is the third largest company on the Mauritius stock exchange with a market capitalization of $680 million.

EDIT; July 6: CBK announced that SBM has commenced the acquisition of certain assets and assumption of certain liabilities of Chase Bank in line with the announcement of April 17, 2018, and following approval from the CBK on June 13, and the Kenya’s Cabinet Secretary, National Treasury on June 28, with a goal to complete the  acquisition and assumption process on August 17, 2018.

Kenya law review to boost microfinance banks

The Central Bank of Kenya (CBK) has published a consultative paper on a review of the country’s microfinance bank laws. It notes that since the first microfinance bank (MFB) was licensed in May 2009 (which as Faulu), the number of licensed MFB’s in the microfinance industry space has increased to thirteen – including Faulu Kenya MFB, Kenya Women MFB, SMEP MFB, REMU MFB, Rafiki MFB, Century MFB, SUMAC MFB, Caritas MFB, Maisha MFB, Uwezo MFB and U&I MFB, with two more – Daraja MFB and Choice MFB – being community-based MFBs.

The thirteen  MFB’s had a total of 114 branches as at December 2017 but there was a drop in performance as their assets declined by 4.6% to Kshs 69 billion at the end of 2017,  with their loans and deposits also taking a dip between 2016 and 2017. The last three years have also seen a decline in their profitability (overall profit of Kshs 549 million in 2015, followed by a loss of KShs 377 million in 2016 and a steeper one of Kshs 731 million in 2017) with the 2017 loss attributed to a reduction in financial income.

CBK found that microfinance banks face various challenges including; they need better governance & structures, have inadequate capital & liquidity, faced increased credit risk & non-performing loans, are reliant on deposits & expensive borrowings, and face more impact  from fintech company innovations, and Kenya’s interest rate caps law (2016) as well as IFRS9.

CBK has made proposals for microfinance banks including improving their corporate governance (through vetting, setting duties & tenure of board of directors and having more independent directors), having a single license for MFB’s (no more national or community distinctions), increasing the minimum capital for existing and new MFB’s, and vetting of MFB shareholders. Others proposals are around risk classification which will shift from the current assumption that loans are repaid weekly, to the reality that they are repaid monthly, and that microfinance loans now have a longer term outlook

Members of the public are invited to give views by March 15 (email: fin@centralbank.go.ke) and these will be incorporated into a microfinance amendment bill (2018) that will later go to Kenya’s Parliament around June this year.

$1 = Kshs 101

IFRS9 capital provisions extension for Kenyan banks

Kenyan banks have been given more time to implement increased provisions as part of the capital compliance in new accounting rules IFRS9.

According to KPMG IFRS9 is still effective as at 1 January 2018 for all entities reporting under International Financial Reporting Standards (IFRS), which includes companies in Kenya. However, because IFRS 9 is likely to have a significant negative impact on banks’ capital adequacy ratios, CBK has given banks a 5 year period in this regard to meet the resulting capital requirements from implementation of IFRS 9. In practice, this means that CBK will allow Banks to stagger the effect of the increase in provisions on capital adequacy ratios over 5 years.

Last year, KPMG joined Barclays Kenya in unveiling IFRS 9 by giving the perspective from the auditor’s side on how they were assisting banks to prepare for the change over including reconciling the enormous amounts of data called for by IFRS9 rules and working with banks to develop models including for better management decision-making and provisions.

See the KPMG IFRS page with stories on how “All corporates need to assess the impact of IFRS 9” and “How corporates might be affected” as well as the recently issued guidelines from the Institute of Certified Public Accountants of Kenya (ICPAK) on the requirements of IFRS 9.

Chase Bank Depositors updated on SBM Deal

Yesterday, officials from the Central Bank (CBK) and the Kenya Deposit Insurance Corporation (KDIC) met depositors of Chase Bank too outline the way forward following the offer deal between the State Bank of Mauritius (SBM) and the CBK for the acquisition of selected assets and liabilities of Chase Bank that is still in receivership.

Peter Nduati, the founder and CEO of the Resolution Group, and a Chase Bank customer tweeted some highlights from the Nairobi meeting.

  • At the #Chasebank depositors meeting. CBK Governor briefing on the back story.
  • SBM will take a maximum of Staff and Branches. There is no compulsion on the part of the staff to move.
  • Moratorium deposits will have 75% of the money move to SBM out of which 50% will have ready access in a current account whilst the balance remains at 7% interest
  • CBK says operationalization is a matter of weeks as far as depositors are concerned. Loans may take 2 months.

  • To paraphrase, we will lose 25% of the deposit but will get 37.5% immediately. 37.5% will be availed in 3 annual tranches with a 7% interest.
  • Its a better position for depositors but not optimum. At least 37.5% will be available and the balance will be in a term deposit earning interest.
  •  For a collapsed bank, I guess it’s the best deal. We have waited almost two years.
  • Non-moratorium depositors move to SBM.
  • I haven’t seen him (Zaf) or Duncan since 2016. Are they here even?

Kenya’s CBK risk safeguards against bank laundering and terror financing

The Central Bank of Kenya (CBK) has published new guidelines to assist Kenyan banks to assess and mitigate the risk that their institutions and systems may be used for money laundering (ML) or terrorism financing (TF).
They risk rules stipulate, among other proposals that:
  • Senior management of banks are to implement board-approved money laundering/terror financing policies.
  • Bank staff are to prepare periodic reports on money laundering and terrorism finance for their senior management and boards of the bank and also communicate these to the CBK. 
  • Financial institutions will be required to appoint a money laundering reporting officer who will be the point of contact for CBK.
  • Banks should assess and rank TF and ML instances and actions in terms of high, moderate, and low risk. 
  • They should identify countries and regions that are high risk for business; high-risk includes countries subject to sanctions from the UN and other credible organizations, countries that don’t have appropriate banking safeguards and countries known to sponsor terrorism.
  • Banks are to assess their customers for money laundering and terror financing risks; suspicious customer activities include frequent and unexplained movements of money to other accounts, or other institutions, and to far locations. They should also look at politically exposed persons who bank with them including prominent public figures, senior politicians, judicial officers, corporate CEO’s who dealing with them, or their families, may bring a reputational risk to the bank.
  • Banks are to assess their service delivery channels for money laundering risks. They are to pay attention to cash-intensive businesses, including supermarkets, convenience stores, restaurants, retail stores, liquor stores, wholesale distributors, car dealers. 
The guidelines follow an earlier directive on paper bag banking from two years ago. The new ML and TF rules are in draft form and bankers and any interested persons are invited to send comments to the CBK on the proposals before January 31, 2018.