Customers of troubled Imperial Bank with deposits of not more than Sh500,000 will start accessing their funds in the next one month. This is after directions from CBK emerged that Imperial Bank should reopened within the next one month.
“The exact amount to be paid out is still under discussion and will be communicated later,” said a CBK statement released to the press on Wednesday evening.
Depositors at the bank with large sums of money will, however, only access 5 per cent of their funds after the reopening, while their balance will be released in a structured schedule over a two-year period.
The decisions are part of several far-reaching resolutions arrived at during back-to-back crisis meetings between the Central Bank of Kenya (CBK), the Kenya Deposit Insurance Corporation and the bank’s shareholders to chart the way forward for the institution.
About two thirds of the bank’s 53,000 customers were small depositors.
“CBK envisages full access to small deposits for small customers, and a structured schedule of repayment to large depositors,” the regulator said in a statement.
Imperial Bank held Sh58 billion in customer deposits as at the end of June.
REOPENING PROPOSAL
On Wednesday, representatives of the regulator and the lender’s shareholders agreed on a proposal that will see the bank reopen and resume operations within a month.
“The proposal will require the injection of new capital, conversion of some of the large deposits to equity, recovery and collateralisation of the fraudulent loans, as well as a change of board of directors and senior management,” the CBK said.
It also emerged that bond holders of Imperial Bank have their money ring-fenced in what will come as a relief to many, with the Capital Markets Authority expected to give advice on the way forward.
The three groups also resolved that the shareholders of the troubled bank inject new capital to plug the identified capital shortfall.
“The ultimate objective is to ensure that the reopened bank will remain viable,” said CBK.
The regulator attributed irregular granting of loans by the bank’s management, contrary to the legal and regulatory requirements for the lender’s woes.
“In particular, these irregular loans were a violation of the statutory limit of lending to a single borrower and inadequate loan loss provisions, thereby overstating Imperial Bank’s capital adequacy position,” the CBK added.
The bank, which was founded as Imperial Finance and Securities Company Ltd and commenced operations as a financial institution in 1992, has 28 branches in Kenya and five in Uganda.