'Malicious' Twitter Posts Blamed for Fanning Kenyan Bank Runby
Chase Bank placed into receivership after panic withdrawals
Speculation on health of lender grew as top executives quit
#KOT, or Kenyans on Twitter, are being blamed for a run on deposits that resulted in Chase Bank Kenya Ltd. being placed under creditor protection by the East African country’s regulators on Thursday.
Central Bank of Kenya Governor Patrick Njoroge said “malicious comments” on social networks including WhatsApp Inc. were part of the reason the lender was placed under receivership.
“We had some individuals that shouted fire in a crowded theater room; to me there is nothing as reckless as that,” he told reporters in the capital, Nairobi. “If one made such horrendous statements, you can cause a run, some crisis. Indeed the bank was under serious pressure.”
Chase Bank on Wednesday sought to assure customers that it was operating normally as a flurry of comments on social-media sites speculated on the financial health of the company. Rumors on the safety of deposits and investments mounted following the resignation of Chairman Zafrullah Khan and Managing Director Duncan Kabui, and concern over a qualified opinion expressed by auditors on earnings that had been restated to show a surge in loans to employees and directors.
“Rumors have been rife on social media which is turning out to be a pre-eminent early warning system,” Aly-Khan Satchu, chief executive officer of Rich Management, an adviser to companies and wealthy individuals, said in response to e-mailed questions.
Kenya had the highest number of tweets in Africa after Egypt, Nigeria and South Africa in 2015, London-based Portland Communications said in a report released April 6.
Among the tweets on the lender, Nation FM radio presenter Mumbi Seraki on Wednesday posted that alleged fraud that had been discovered at Chase Bank with funds missing on its books. She followed that up with a tweet on Thursday saying that “It’s not the #PowerOfKOT that brought #ChaseBank down but poor financial decisions & abuse of office!” in reference to the hashtag used to describe Kenyan Twitter users. Seraki declined to comment beyond her Twitter remarks when contacted by mobile phone on Thursday.
“Inaccurate social-media reports” caused liquidity difficulties for Chase Bank, with the central bank having to step in on Wednesday and work through the night to try and save the lender, the governor said. There were no signs of fraud, which will make it easier to nurse the company back to health, with the support of its shareholders, Njoroge said.
“Do not worry, Chase Bank. Everybody is broke in their 20s,” theMagunga, an online book publisher and store run by Magunga Williams, said in a post on Thursday, referring to the lender’s 20th year in existence. “Feel sick. Literally feel sick. Entrepreneurship is hard enough,” tweeted Shamit Patel. “Their slogan is ‘The Relationship Bank.’ Well Chase Bank, I think we’re officially broken up.”
While some users on Wednesday questioned why the bank had to restate it’s figures to account for employee loans and why executives are leaving, support came from some customers who have been happy with Chase Bank’s services, and even peers, including Donald Kipkorir, a director at small loans lender Sidian Bank, who said Chase Bank is solid, with strong fundamentals. Assurances from Chase Bank that it is sound failed to stem withdrawals, with some users posting pictures of ATMs not working and one complaining that he didn’t make it in time to get his money.
The company wants to return back to operations as soon as possible, Njoroge said. It’s shareholders will inject liquidity into the bank and are committed to working with regulators to reopening quickly, he said.
Investors in Chase Bank include Amethis Finance SAS, a Paris-based company focused on investing debt and equity in Africa, and KfW, the German development-finance group, according to an April 2015 document published on the lender’s website. responsAbility Participations AG, a Swiss investment company known as rAP, holds a 3 percent minority equity share in Chase Bank, rAP Chairman Klaus Tischhauser said in an e-mailed response to questions, declining to comment on future developments at the lender to avoid more speculation.
Andreas Grenacher, regional director of KfW’s East African operations, didn’t immediately respond to e-mailed questions. Twitter doesn’t comment on individual accounts, the company said in an e-mailed reply to questions. Chase Bank Chief Executive Officer Paul Njaga didn’t answer several calls to his mobile phone on Wednesday and Thursday.
Chase Bank is the third lender be taken over by regulators since Njoroge was appointed as governor of the central bank in June as the country’s smaller financial institutions struggle for liquidity against larger peers and non-performing loans climb, with not enough money set aside to cover potential losses.
In June, the lender raised 4.8 billion shillings in bonds due in June 2022 as part of a 10 billion-shilling Medium-Term Note Program. Global Credit Ratings, a Johannesburg-based company, in July assigned Chase Bank an A-(KE) rating with a stable outlook.
The African Development Bank last month granted Chase Bank a $50 million loan for onward lending to small- and medium-sized enterprises. The loan hadn’t been taken up yet, Njoroge said.