NAIROBI: Kenya’s central bank placed Imperial Bank Ltd., which completed a bond sale earlier this month, under statutory management because of “unsafe or unsound business conditions,” sending banks’ shares lower.
The Kenya Depositors Insurance Corp. is working with directors of Imperial Bank to find a “resolution mechanism,” according to a statement published on the website of the central bank in Nairobi on Tuesday. No one at the KDIC was available when Bloomberg called seeking comment. Calls to Imperial Bank weren’t answered.
Imperial is the second lender to be taken over by Kenyan regulators since Patrick Njoroge became governor of the central bank on June 19. Dubai Bank Kenya Ltd. was placed under the management of the authorities in August.
The central bank decision creates a “serious confidence crisis” among Kenya’s mid-sized lenders, George Bodo, head of banking research at Ecobank Capital Ltd., said by e-mail from Nairobi. “This event also escalates counter-party risks, given the high level of interconnectedness among banks.”
Imperial Bank’s interbank borrowings, which amounted to 1.6 billion shillings ($15.5 million) in the first half, “are still outstanding and I’m sure these have not been settled,” Bodo said.
The central bank said that while it had put the lender under management after Imperial’s directors alerted it to inappropriate practices, Kenya’s banking industry remained “safe and robust,” according to a joint statement with the Capital Markets Authority.
