Kenya Pledges Tighter Bank Supervision After Imperial Seized

  • Central Bank Governor Njoroge Promises Tighter Surveillance
  • Imperial Bank Case Unique, Kenya Banking Sector Sound: Njoroge

Kenya’s central bank head promised tighter surveillance of the banking industry after the regulator was forced to place Imperial Bank Ltd. under management.

The central bank, which said Imperial was a unique case, handed the lender to receivers last week after the bank’s board brought some malpractices such as unreported loans to its attention, Governor Patrick Njoroge told reporters Wednesday. It also moved partly because the bank’s bond was due to start trading at the Nairobi Securities Exchange the following day.

“Question is, how did we miss what happened?” Njoroge said.

Imperial was the second lender to be placed under receivership since Njoroge took over at the central bank’s helm in June. Dubai Bank Kenya Ltd. was shuttered in August after liquidity problems. “The decision that was made was deliberate,” he said. “The decision wasn’t taken lightly.”

An investigation on Imperial would be ready in about a week’s time, Njoroge said, adding that all possible resolutions were under consideration, including liquidation or finding a strategic investor for the bank.

Imperial held 48 billion shillings ($470 million) of deposits and 62 billion shillings worth of assets at the end of September, Njoroge said. It has 27 branches in seven towns.

Social media reports of other institutions not meeting standards were wrong and disruptive to the banking industry, Njoroge said, reiterating that the system was safe and sound.

“It’s an isolated incident,” Joyce-Ann Wainaina, head of Citigroup Inc. in East Africa, said during an interview in Dubai on Tuesday. “I don’t think this is an industrywide issue.”

Njoroge criticized Moody’s Investors Service view that the central bank’s treatment of Imperial Bank would lead to tougher funding conditions for smaller banks. The rating company’s analysis that the regulator and other lenders wouldn’t support banks under pressure was “speculation.” There had been no dramatic capital flight from banks, which showed investor confidence in the industry, he said.

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