NAIROBI: Kenya’s banking regulator missed possible “malpractices” at Imperial Bank Ltd before it was taken over by a government agency last week, exposing weaknesses in the supervision of banks, the central bank governor said on Wednesday.
The central bank appointed the Kenya Deposit Insurance Corp (KDIC) to manage Imperial Bank, a mid-sized lender, for up to 12 months. It was the second bank taken over since August, when Dubai Bank Kenya Ltd was put in receivership after liquidity problems. Imperial’s board of directors alerted the central bank to evidence of irregular lending, which led to the seizure of the bank, central bank Governor Patrick Njoroge said.
“It is clear that we need to strengthen our bank supervision dramatically,” Njoroge told a news conference. “There will be consequences.” The central bank will train its staff to uncover information technology-based fraud, the governor said. Supervision guidelines will also be reviewed.
The problems at Imperial were uncovered after the bank’s chief executive and founder, Abdulmalek Janmohamed, died suddenly last month. Njoroge said Imperial’s auditors and its board had failed to uncover them earlier.
Privately held Imperial, which appointed a new managing director in September after Janmohamed died, was ranked 19th out of Kenya’s 45 lenders at the end of 2014. On June 30 this year, it reported assets of 70.3 billion shillings ($688.54 million).
KDIC is expected to offer a resolution for the bank. Njoroge said all options, including recapitalisation or liquidation of the bank, will be considered, but the central bank would prefer re-opening the bank as a going concern.
Banking stocks fell on concern over health of the sector’s health, but Njoroge said that there was ample liquidity in financial markets and the banking sector was “safe and sound”.
