Following the receivership of Chase Bank Kenya over financial trouble, the Central Bank of Kenya (CBK) has announced that the bank will reopen on April 27 under the Kenya Commercial Bank’s (KCB) management.
Customers will have immediate access to their deposits up to a maximum of Sh1 million, CBK says.
167,290 accounts, equivalent to 97 per cent of accounts or 6 per cent of total deposits, will have their funds available in full.
The deal with Kenya Deposit Insurance Corporation, signed at 8.30am on Wednesday, will see the bank’s 62 branches reopened by next Wednesday, April 27 2016.
The CBK had received nine proposals, including six from local investors, two foreign and one from existing Chase Bank shareholders. The bank’s shareholders had proposed to inject more cash for its revival.
KCB was chosen for their offer to re-open the bank immediately as well as their credibility and cash to support operations. The reopening will be followed by their eventual acquisition of a majority stake in the bank.
Other announcements from the acquisition are as follows
Deposits in excess of Ksh.1 million will be made available in a structured manner, details of which will be released in the near future.
The moratorium on payments to creditors and lenders remains in place. However, the Manager will correspond with them in the near future with details of how these would be dealt with.
Ongoing efforts to collateralize existing loans and recover funds that were obtained irregularly or are non-performing will be stepped up. Existing borrowers are required to continue servicing their facilities.
CBK and KCB will ensure that Chase Bank Ltd (In Receivership) will have adequate liquidity for its operations.
KCB will make available a management team that will assist in the receivership.
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.
Following the placing of Chase Bank Kenya under receivership, customers are in panic mode. In the interest of its depositors, creditors and members of the public, CBK has appointed Kenya Deposit Insurance Corporation (KDIC) as the receiver manager. Here’s more information.
Customers can now follow up on their Chase Bank accounts via 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: email@example.com for more information.
Chase Bank has since issued a statement seeking to quell rumors that customers’ funds were at risk.
“We would like to take this moment to reassure the general public that our customers’ funds and investments are safe. ” A statement on their Facebook page read.
According to CBK, the KDCI team would be given 12 months to come up with an “appropriate resolution strategy”.
All 62 of its branches would remain closed until new management was put in place, said CBK chief Patrick Ngugi Njoroge.
“The Central Bank of Kenya has today Thursday appointed Kenya Deposit Insurance Corporation (KDIC) as the receiver manager for Chase Bank Limited for a period of twelve months, pursuant to the provisions of Sections 43 (1), 43(2) and (53)1 of the Kenya Deposit Insurance Act, 2012,” said CBK in a statement.
KDIC will assume the management, control and conduct of the affairs and business of the institution to the exclusion of its board of its directors and advise CBK of an appropriate resolution strategy as soon as it practicable and not later than twelve months, CBK said in the statement.
CBK has previously put 2 other banks under KDIC receivership which include the recently troubled Imperial Bank and Dubai Bank. Seventeen (17) other financial institutions are currently under liquidation.