Troubled lender Chase Bank irregularly advanced Sh16.6 billion to various entities, many of them associated with insiders, putting billions of shillings belonging to 55,000 depositors at risk.
Half of the irregular loans went to the bank’s insiders, the Central Bank of Kenya (CBK) said in a statement on Thursday after it placed Chase Bank under statutory management.
The statement indicated, for instance, that one director lent himself Sh7.9 billion mostly without registered collateral and beyond regulatory limits.
The director gave himself more than the 25 per cent of the total capital limit set in the Banking Act.
The actions of the director — whom the auditors called a significant shareholder — have now made it uncertain as to whether the more than Sh95 billion deposits would be refundable to their owners, mostly small and medium-sized enterprises.
Central Bank Governor Patrick Njoroge said that apart from the Sh7.9 billion lent to the director, there were doubts as to whether additional Sh8.7 billion could be recovered, given that large segments of it were not being serviced or lacked documentation.
“What we have seen at Chase Bank is a situation where the auditor has expressed major concerns regarding recoverability of loans and unsecured insider lending,” Dr Njoroge told a press conference in Nairobi.