Seventeen (17) financial institutions are currently under liquidation in Kenya.
Liquidation is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations as and when they come due. The company’s operations are brought to an end, and its assets are divided up among creditors and shareholders.
The following banks are currently under liquidation in Kenya, some of which payments to customers and shareholders is underway through the Kenya Deposit Insurance Corporation.
Post Bank Credit Ltd.
20th May 1993
Meridien BIAO Ltd.
15th April 1996
Ari Bank Corporation Ltd.
5th December 1997
Reliance Bank Ltd.
12th September 2000
Trade Bank Ltd.
18th August 1993
Thabiti Finance Co. Ltd.
19th December 1994
Fortune Finance Co. Ltd.
14th September 2000
Daima Bank Ltd.
13th June 2005
Dubai Bank Kenya Ltd.
24th August 2015
Prudential Building Society
18th January 2005
Middle African Finance Ltd.
20th August 1993
Pan African Bank Ltd.
18th August 1994
Pan African Credit & Finance Ltd.
18th August 1994
Kenya Finance Bank Ltd.
29th October 1996
Prudential Bank Ltd.
5th May 2000
Trust Bank Ltd.
15th August 2001
Euro Bank Ltd.
21st February 2003
Stakeholders can follow up with the Kenya Deposit Insurance Corporation which is located at 1st Floor, CBK Pension House, Harambee Avenue, Nairobi, Kenya. Their website is http://www.depositinsurance.go.ke/.
Those with questions can call the KDIC on Tel. No. 0770 887992. Customers can also contact KDIC on email: firstname.lastname@example.org for more information.
3 banks have been put under receivership over the last 2 years. It’s safe to say that banking in Kenya has become a high risk venture. How then can you choose the right bank?
CBK classifies banks into tiers. Tier 1 is made up of the big old banks. These will ALMOST certainly never go under in a similar way as Chase or Imperial. They have millions of clients and hundreds of billions in assets. Some have government participation while others are locally and foreign owned.
6 banks make up the top tier, and collectively control 49.9% of the market. The banks are as follows-:
16 other banks make up Tier 2, and collectively control 41.7% of the market. The most stable of Tier 2 being the following banks
Diamond Trust Bank
Bank of Africa
The last tier, Tier 3 is made up of 21 small banks that control 8.4% of the market. The following diagram provides a clear picture of the classification.
In June 2015, CfC Stanbic lost top-tier bank classification to CBA after dropping its market share by 0.5 percentage points to 4.92 per cent.
Changes in market share in the banking sector are mainly occasioned by growth in customer deposits as banks deployed various strategies for deposits mobilisation.
CBK has previously put over 3 banks under the Kenya Deposit Insurance Corporation (KDIC) receivership which include the recently troubled Imperial Bank, Dubai Bank and now recently Chase Bank.
According to PWC, a Receivership is a remedy available to secured creditors to recover amounts outstanding under a secured loan in the event the company defaults on its loan payments. A Receiver may also be appointed in a shareholder dispute to complete a project, liquidate assets or sell a business.
In Kenya, the Central Bank of Kenya (CBK) has previously put over 3 banks under the Kenya Deposit Insurance Corporation (KDIC) receivership which include the recently troubled Imperial Bank, Dubai Bank and now recently Chase Bank.
Typically, the process begins with the appointment of a Receiver either by the secured creditor under a security agreement (“Privately Appointed Receivership”) or by the Court on behalf of a secured creditor (“Court Appointed Receivership”). Only a licensed Trustee in Bankruptcy can act as a Receiver.
Privately Appointed Receivers will generally only act on behalf of the secured creditor that appointed them and will realize on the assets specifically covered by the loan agreement. Court Appointed Receivers however, are officers of the Court and act on behalf of all creditors. The powers and rights of Court Appointed Receivers are included in the Court order that appointed them.
The Receiver is appointed to take possession of and sell or liquidate the assets secured by the security agreement in order to repay the outstanding debt.
In a Receivership, a secured creditor or the Court may also appoint a Receiver-Manager to operate and manage the business until it is sold as a going concern.
The Receiver’s duties also include notifying creditors of the receivership and regular reporting to the Official Receiver (a representative of the Office of the Superintendent of Bankruptcy) and/or the Court on the status of the receivership.
Receivership and bankruptcy are not mutually exclusive, they can occur at the same time or a receivership can occur without a company being bankrupt. The same firm may act as Trustee in Bankruptcy and Receiver, but often different firms are appointed to these roles.
The Receiver is tasked with selling the assets secured under the security agreement and after deducting the receivership’s fees and expenses, distributing the proceeds from the sale to creditors on a priority basis. In situations where the proceeds from the sale of assets are not sufficient to fully repay the liabilities of the secured creditor, no realizations will be available for distribution to the unsecured creditors.
Patrick Kagunya is the Director Financial Advisory at Getworks and Chief Executive Officer at Wescotts Financial Consultants. He offers some insight on how to tell if your bank is in trouble.
With Chase Bank in receivership most depositors must be asking themselves so which bank is safe ?
Spotting trouble isn’t easy (witness the current crisis), but there are some warning signs, if you know where to look. The KDIC and CBK keeps these quarterly financial reports on every Kenya financial institution.
Clearly, economic conditions have changed in the last three months, and as detailed as these reports appear to be, there still are plenty of unknowns. However, these reports do offer some clues as to your bank’s ability to weather the storm.
First, a healthy word of warning: A few numbers in a report don’t mean you should snatch your funds and run for cover. If you’re worried that your bank might teeter, don’t panic. Talk at length with your financial adviser before making any sudden moves. If you want some extra protection in the meantime, think about diversifying your risk by making additional deposits in a few other banks.
One important measure of a bank’s financial stability is its risk-based capital ratio. By law, commercial banks need to keep a certain amount of capital on hand to cushion their loan portfolios. The CBK mandates that a bank’s risk-based capital be no less than 8% of its total assets.
Next, look at the bank’s loan-to-deposit ratio. Even if your bank didn’t lard up on mortgage-backed securities, it might still be “loaned up”–meaning that it has maxed out its percentage of loans to deposits on hand. The larger that percentage, the greater the risk the bank has taken on. If customers begin to pull deposits, the bank might be suddenly strapped for cash.
Healthy loan-to-deposit ratios typically fall between 95% to 105%,. Venture much higher than that and the bank could be courting trouble. To find this ratio, divide “loans and leases, net of unearned income and allowance” by “deposits”.
A third metric is the percentage of the amount of non-current loans (those 30 days or more past due) vs. total amount lent. Some fraction of those non-current loans will have to be written off, eating into the bank’s precious capital.
“When 10% of your loans are non-performing, that starts to become very problematic,”.
To calculate your bank’s percentage, divide the total amount of loans that are 30 days or more past due by total loans and leases.
If your bank is struggling and the KDIC takes it over, know that you may not have access to your funds for several days during the change-over period. To be safe, small-business owners should have a week’s worth of operating expenses deposited in more than one bank.