Monthly Archives: April 2016

5 days later, Chasing rainbows, a look at Chase Bank.

It is exactly 5 days since Chase Bank Kenya was placed under receivership by the Central Bank of Kenya, the market has since quieted, some semblance of calm has returned as would-be suitors, Investors and Strategists sit to chart the way forward.

It’s been an interesting time, not easiest for Business Journalists on twitter though!

When a group of friends and I sat and thought about starting a conversation that looked at the other side of the story, where thousands of depositors couldn’t pay their rent, buy food for their children, or pay school fees, I was startled to read about payments to twitter ‘influencers’ by ‘worried indigenous capitalists’.

Our conversation however wasn’t just about Chase bank. The ripple effects of shutting down a bank are felt across a number of financial institutions.

However, it’s important to note the cash did not leave the country’s system, they were just moved and held by alternative or presumptively ‘safer’ financial institutions.

Reporting on Chase Bank has seen few days of intense learning.

I’ve spent my days speaking to everyone and anyone and even though there are so many versions of the story, there is a common thread.

There was a restating of accounts, and the bank run was amplified by anxiety driven by social media platforms. 8 billion shillings was drawn out of the bank within 48 hours.

Let’s looks at some scenarios that surround the possible comeback of Chase Bank.

Central Bank has been cleaning up the sector, but has also been accused of handling this matter with undue rigidity, analysts I spoke to say, for a bank whose deposits sat at close to 100 billion shillings, the regulator had the ability to save Chase, by offering a quick facility as lender of last resort at the very moment Chase bank raised the alarm of a possible bank run. Though in September last year, Governor Njoroge had warned banks about managing their own liquidity other than rushing to borrow from CBK through the discount window.

There seems to be a deep level of disquiet among bank stakeholders who say Central Bank had several options to save Chase Bank, especially because CBK has been categorical that the Bank was in sound financial conditions. If indeed their books were healthy, did CBK have to let it close?

Could CBK have opted to sell securities held by chase bank to cover the 8 billion shilling hole? Analysts say should this have happened, the managers responsible for the mess would still be brought to book, but most importantly, depositors would be protected.

Some ask ‘Why couldn’t Central Bank take over Chase bank other than close it and place it under receivership?

There are several arguments for complete absorption of the bank by a larger bank, driven by fears that once the bank will open, customers will queue to withdraw their funds.

KCB and centum have been touted as possible local suitors and CBK confirmed that there are also a number of international interests.

However, some believe that for Chase to get any sort of confidence, it must be backed by one of the BIG FIVE.

Watching that space.