The Central Bank of Kenya (CBK) announced that today that the closed Imperial Bank (IBL), will not reopen. In fact it will be liquidated by NIC Bank, Kenya’s 9th largest bank.
This all started 9 months ago, on 15 September 2015, when the Imperial Bank group managing director (GMD), Abdul Janmohamed passed away. The bank directors then discovered fraudulent transactions that the GMD has orchestrated at the bank. They presented their findings to the CBK, who then shut the bank.
While the CBK blames the board and shareholders, the, the shareholders/directors say they were innocent of the wrong-doing perpetrated by the GMD; they had a hands-off role (complying with CBK rules for non-executive directors), and that their external auditors and the Central Bank were lax and should have flagged the 13 year fraud. The shareholders of the bank were optimistic that a strategic investor would buy the bank within 12-18 months of reopening. But it’s not clear if NIC has been selected to do that by the Kenya Deposit Insurance Corporation (KDIC). NIC will also assume the majority of IBL staff and branches, and announcements on the way forward will be made in the near future.
- NIC will pay Kshs 1.5 million to all depositors. Thereafter, it is expected that at some point, NIC will pay any remaining depositors about 40% of their proven deposits (there are individuals and institutions who had tens or hundreds of millions of shillings as deposits) (Last year, KDIC used KCB and Diamond Trust banks to refund Kshs 1 million to each depositor at Imperial Bank)
- NIC will get access to operate the 26 branches in Kenya. But the 2015 bond information memorandum noted that Imperial owned no property. The Bank owns no Properties. It leases all the premises used for its business operations. In Uganda, the 5 branches there were disposed of in a sale.
- It’s not clear how many of the 600 employees at Imperial are still around, waiting for jobs
- The CBK statement notes that a forensic audit is almost complete. This is an exercise that the directors of the bank began after the GMD died to determine the extent of the hole in the bank.
- Court cases will continue and KDIC will retain other assets of the bank (..cash, collateral, government securities, loans..)
- If it heads to liquidation, the name Imperial Bank (name) will disappear.
$1 – Kshs 101
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its very disappointing considering mostly Asian clients used imperial bank,, the handover to NIC is puzzling . the indigenous Kenyan has never understood Asian accounting and vice versa ,even central bank has not clearly understood the accounts and depositors and the cbk was heard to ask in the press why 60% of depositors never came to claim their money from imperial payout which was very measly .. why was diamond trust not appointed to this job who understand the Asian clients and so the transition could have been smooth , handing over to nic is going to be unsettling to the ex imperial clients
the handover to nic can be considered as an knife in the back of the Indian community considering that 70% Indians banked with imperial and diamond trust
i had great hope on this governor and his new broom tactics but this is a complete disaster to Indian business community , and it will affect our economy as well
the results will speak for themselves if NIC Bank hopes to retain the Indian clients u have a another surprise coming your way my friend !!!!
Hi Ashwin: Yes that’s been a challenge from day one – for Imperial bank despositors to combat the perception that the problem with Imperial was an Asian bank that collapsed only with Asian depositor money. I think part of the problem was that, if someone lost 20 million in Imperial, what is the point of collecting 1 million? If the payout was more significant, then they would show up
But I’m curious to know how Asian banking works and how it fits in with a commercial bank. At Chase, incorporating Shariah, was one of the main challenges that led to a dispute with the auditors that accelerated the bank problem and closure.
We shall see how NIC handles Imperial bank customers, as clients.
what will happen to the 2 billion bond holders? Are they being refunded?
No idea. So far most of the focus has been on depositors ~50B, not the 2B bondholders.