Imperial Bank large depositors are set to open a new chapter in their fight for Sh40 billion held by Kenya deposit Insurance Corporation (KDIC) since the bank was placed under receivership two years ago.
The move is a reaction to months of silence from Central Bank of Kenya (CBK) on the financial position of the bank during the period it has been under receivership.
Money & Markets can authoritatively report that the depositors are working on modalities of teaming up with the bank’s shareholders in their fight to protect their funds deposited at the bank.
In a scheme that will put CBK and Kenya Deposit Insurance Corporation (KDIC) in a tight corner, the depositors have also dropped their demands for payments of part of their deposits and are now calling for the bank to be reopened.
Essentially what this means is that the depositors have denied CBK and KDIC the excuse to dispose the bank’s assets in an effort to pay them.
So far, the large depositors have the biggest stake if the bank’s half year financial results in June 2015 are anything to go by.
According to the financial statements, the bank had in excess of Sh50 billions of depositors money which made up 81 percent of the bank’s total liabilities.
Out of this amount, Sh36.2 was tied up in loans to customers or 59 percent of its assets.
While Sh15 billion or 24 percent was held up in government securities.
KDIC has so far paid out Sh12.2 billion to depositors or 20 percent of the deposits going by the financial results of June 2015. The payment includes Sh8 billion to small depositors and sh4.2 billion to the large depositors.
This means the depositors hold more than Sh37.8 billion interest in the bank today.
“Yes. We have changed our tact in dealing with CBK and KDIC. We no longer want part payments of our funds. We are going to fight against liquidation with all our energy with the objective of having the bank reopened,” said Mahmood Khambiye who chairs the Imperial Bank Lobby Group.
However Khambiye says the formal decision on whether or not to work with shareholders will be taken in two weeks’ time when the depositors meet to discuss the way forward.
“As a lobby group all our decisions are done democratically and transparently. That is why we have called the May 13, 2017 meeting. As you may be aware, Justice George Odunga gave the depositors the go ahead to engage with other stakeholders on the way forward in resolving the receivership,” says Khambiye.
In his ruling on case filed by shareholders against covert actions leading to the liquidation of the bank through disposal of assets, Odunga ordered the CBK and KDIC to engage the shareholders, depositors and bondholders to find a resolution of the bank’s receivership.
“An order mandamus directed to respondents (CBK and KDIC) and each of them compelling them to formally engage the ex-parte applicants (shareholders and non- executive directors) together with other stakeholders including depositors and bondholders of the bank with a view to jointly and to the extent permissible by law, finding a workable legal framework for an outcome that is in the interest of the bank, and all stakeholders,” said Odunga in his ruling in November last year.
The change of tact comes after depositors hit a brick wall in their attempts to get information from CBK and KDIC on the state of bank for the 17 months it has been in receivership.
In March this year, the depositors wrote to KDIC demanding financial statements of the bank for the receivership period and also the details of the arrangement between bank’s receiver and NIC Bank which was appointed to be assets and liabilities consultant at the bank.
“Take notice that unless you make material disclosure of the information required to effectively engage the rest of the stakeholders within the next seven days, we have instructions to file a suit to enforce the depositors’ right to information under the prevailing circumstances,” said the depositors through their lawyer Josephine Kogweno in the letter dated March 27, 2017 and copied to CBK governor Patrick Njoroge.
Khambiye says the depositor are now headed to court to compel CBK and KDIC to provide the information since a seven day notice they had given for action has long lapsed.
KDIC reneged on its promise to pay depositors part of deposits as promised in November last year. In a press release, CBK and KDIC had promised to pay the depositors 40 percent of their savings but is yet to do so six months later
Khambiye told this news site that the depositors believe that CBK governor Patrick Njoroge has been dishonest in his dealing with depositors necessitating a change of strategy in pursuit of their interests.
“We have been very patient with the CBK but they have treated us dishonestly. The governor has made several promises on paying us our moneys but he has broken each of those promises,” said Khambiye.
The bank was placed under receivership following the discovery of a fraud where over Sh38 billion was lost.
A forensic audit showed that the fraud was orchestrated by its former managing director Abdulmalek Janmohammed and members of a fishing family operating under the W.E Tilley Ltd.
The forensic audit also found that Central Bank officials helped to cover the fraud for more than 10 years.