WORD

Kenya’s central bank is trying to stop a mid-size bank failure from triggering panic

Quartz africa
Quartz africa

Kenyan regulators and bankers are scrambling to quell panic over the suspension of a mid-sized retail bank earlier this week, the second lender to be put under management by government authorities in three months.

Kenya’s central bank said today (Oct. 15) that the banking system remains “safe and robust” and that it “stands ready to use all instruments at its disposal to provide adequate liquidity.”

The announcement comes after the regulator put Imperial Bank, Kenya’s 19th largest bank, on receivership for up to a year, citing “inappropriate banking practices.” All operations have been frozen aside from loan repayments. Authorities have asked depositors to be patient.

Nonetheless, alarm has started to spread. The bank held 58 billion Kenyan shillings (about $570 million) in customer deposits in June, mostly in accounts held by businesses, the bank’s target customers. Some depositors began collecting outside of closed offices of the bank after news of the suspension earlier this week.

Shares of banks listed on the Nairobi Securities Exchange are taking a hit, with NIC Bank and Standard Chartered down 6.71% and 5.50% by midday, respectively. Imperial subsidiaries in Uganda have been placed under the management of Uganda’s central bank.

The Central Bank, Kenya Bankers Association, and Kenya Depositors Insurance Corp, which is now managing Imperial, have taken to social media to assure the public of the stability of the financial system. A list of 22 banks alleged to be slated for closure circulated on social media, prompting the central bank to call on residents to ignore rumors. The Kenya Bankers Association also released a statement dismissing the list.

Imperial Bank appointed a new managing director in September after the death of Abdulmalek Janmohamed, who had led the bank since its founding in 1992. Imperial had completed a bond sale earlier this month, a 2 billion shilling ($19 million) bond that was to begin trading on the Nairobi Securities Exchange on the same day the bank was suspended. The listing has since been canceled.

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