Failed banks hold Sh13bn in customers’ cash— IMF

Central Bank of Kenya. FILE PHOTO | NMG Customer deposits worth Sh13.7 billion are still held up in some Moi-era banks that went bust up to three decades ago, a new International Monetary Fund (IMF) report has shown, underscoring the high cost of liquidating banks and selling off assets to settle liabilities.

According to the IMF report, the 17 banks, 14 of which were liquidated between 1994 and 2003, were holding assets worth Sh84.6 billion, which includes unpaid loans and properties that could be actively generating returns in the market.

This is the first time that authorities have compiled the total balance sheet of the lenders under liquidation after the IMF said they had the potential to affect money supply in Kenya.

The Bretton Woods institution said that if those deposits were acquired by existing commercial banks and included as deposits in broad money, the maximum impact would be to increase 0.51 percent of broad money in the economy.

Kenya Deposit Insurance Corporation (KDIC) provided the Central Bank of Kenya (CBK) with a trial balance data for each of the 17 commercial banks in liquidation as of January 2018.

“In aggregate, total assets of all banks in liquidation amount to Sh84.6 billion, accounting for 1.9 percent of commercial banks’ total assets. Loans outstanding account for 3.1 percent of commercial banks’ loans. Deposits account for 0.45 percent of commercial banks’ deposits both included in and excluded from broad money,” the IMF advisory team said.

Resolution of several institutions have dragged for three decades, leaving dispossessed depositors in their wake as the KDIC tries to sell off the banks’ properties and go after borrowers to repay depositors.

Since 1993, several lenders including Post Bank, Trade Bank, Trust Bank and Euro Bank, have collapse due malpractices and irregular lending by executives and political cronies.

Dubai Bank, which was the last lender to be liquidated in 2015, was linked to dubious lending worth Sh1.3 billion to a dozen firms associated with Moi-era powerbrokers, including former Youth for Kanu ‘92 chairman Cyrus Jirongo, according to an audit report by Crowe Horwath East Africa. Upon its collapse, nearly 99 percent of its borrowers stopped repaying loans totalling Sh4.4 billion, prompting KDIC to resort to collateral and litigation to recover some money with which to pay depositors.

KDIC also sought to attach Sh1.1 billion that the bank’s founder and former chairman, Hassan Zubeidi, was demanding from a Khartoum-based contractor, Active Partners Group, in a separate […]

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