It is exactly 5 days since Chase Bank Kenya was placed under receivership by the Central Bank of Kenya, the market has quieted, some semblance of calm has marked the last few days, as would-be suitors, Investors and Strategists sit to either own a part of the bank, or help in the turn around.
It’s been an interesting time to say the least. Not perhaps the easiest for Business Journalists on twitter. Those streets have their owners they say, and maybe one day when I learn the ways of it’s alleyways, and maybe then I will understand how tweeting a contrarian opinion equals payment by whatever sources the streets decide. I’ve not put my price on my integrity, because it’s not for sale, not now, not ever.
When a group of friends and I sat and thought about starting a conversation that looked at the other side of the coin, where thousands of depositors couldn’t pay their rent, or buy food for their children, or pay school fees, now that the new term is just about to open, I was startled to read about payments to ‘influencers’ by ‘worried indigenous capitalists’. Really. It wasn’t about Chase bank, the ripple effects of the run were felt across a number of financial institutions, however, the interesting point is that the cash did not leave the system, they were just moved and held by alternative or ‘safer’ financial institutions.
Reporting on Chase Bank has been incredible. It’s been a few days of intense learning. I’ve spent my days speaking to everyone and anyone who’s an authority in banking, and even though there are so many versions of the story, there is a common thread. There was a restating of accounts, possibly pointing to cooking of books, and whether we believe it or not, the bank run was amplified by anxiety. 8 billion shillings was out of the bank within the span of 48 hours.
So, all’s said and done, Let’s looks at some scenarios that surround the comeback of Chase Bank, if there is a comeback at all.
The blame game, of course continues even as analysts’ piece together data and varied narratives to find out exactly what brought the bank down, and how to turn it around.
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, even though in September last year, Governor Njoroge had warned banks about managing their own liquidity other than rushing to borrow from CBK through that particular discount window.
There seems to be a deep level of disquiet among bank stakeholder across the sector, who say Central Bank had several options to save Chase Bank, especially because CBK has been so vocal about Chase Bank being in sound financial conditions. If indeed their books were healthy, did CBK have to let it fail?
When a Bank fails, the people that suffer the most are regular wananchi who put all their eggs in the basket of the one they trust. No matter how grave the situation of any bank is, the first person that must be protected is the depositor.
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.
Let’s look at an alternative scenario, ‘Why couldn’t Central Bank take over Chase bank other than close it and place it under receivership?
I’m looking to read and hear alternative opinions about this option based on historical bailouts and what the process would have entailed.
However, with those three options now overtaken by time and events, industry stakeholders are now pondering over the next step for chase bank.
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.