The challenges that led to the collapse of Chase Bank Kenya Ltd. are isolated and don’t indicate an unstable lending industry or pose a systemic risk, according to the East African nation’s main banking lobby group.
Chase Bank, which was placed under receivership on April 7, was the third small-sized lender in nine months to go into statutory management after Dubai Bank Kenya Ltd. and Imperial Bank Ltd. were taken over by regulators in August and October respectively.
“We acknowledge that Kenyans are concerned about the industry developments and regret the anxiety that has been caused,” KBA said in a statement in the Nairobi-based Daily Nation newspaper. “We commit to work closely with the CBK to help restore trust in the industry,” it said, referring to the Central Bank of Kenya.
KBA said it would work with the regulator to improve risk management and governance in the industry.
Police have also questioned six executives at a fourth lender, National Bank of Kenya Ltd., for alleged malpractices. Kenya’s 10th largest bank posted a full-year loss after increasing provisions for bad loans.
Central Bank Governor Patrick Njoroge has said that while the industry is stable, many smaller institutions are struggling with liquidity because 80 percent of the financial system’s cash is in the hands of seven of the country’s 42 lenders.