Kenya Commercial Bank (KCB) has announced it has entered a crucial phase that will determine the future ownership and funding of Chase Bank.
The new phase of Chase Bank, in receivership, will focus on having a framework that will allow the Bank deal with maturing deposits, taking in new deposits, opening up new lending and conducting a due diligence on the bank.
KCB Group CEO and MD Kenya Joshua Oigara said that the Central Bank of Kenya (CBK) has appointed an independent international firm to conduct due diligence and valuation of Chase Bank (IR).
“We have received tremendous support from customers, depositors and other stakeholders to give Chase the firm standing that it is now grounded on which we believe will usher it out of receivership, ” said Oigara.
“The Chase Bank story is being watched closely in the banking community around the world. The successful revival of Chase Bank is an endorsement of the Kenyan banking sector’s ability to effectively deploy globally benchmarked solutions to solve local market challenges,” he added.
KCB was appointed the receiver manager by the Kenya Deposit Insurance Corporation (KDIC) and since April, Chase Bank has recorded improved inflows in excess of Sh10 Billion.
The receiver manager said the lender has signed up 3,200 new customers.
Some of the milestones that Chase Bank hit since reopening on April 27, 2016 include: allowing small depositors access up to Sh1 million, activating automated teller services, real-time gross settlement, limited lending for trade finance services up to Sh5 million, VISA services and the restoration of correspondent banking by Deutsche Bank, one of the largest banks in the world.
Deutsche Bank’s decision, KCB Bank said, demonstrates global confidence in the Chase brand.
Oigara said KCB remains an interested party in Chase, adding that a conclusive decision will be made after the due diligence is completed.
“We intend to close this in the shortest time possible to relieve pressure from customers. We are now keen on looking deeper into the business to determine the next step of action in as far as bringing Chase back is full operations is concerned,” he said.
“This will then help settle the question of how the balance sheet of Chase Bank will be funded going into the future, and who will be the owner. The ownership, of which KCB will be one of the interested bidders, will be determined independently by CBK.”
The second phase is crucial in order to enable customers to start unlocking part of the billions of shillings in deposits, which are frozen by law. At the moment, the receiver manager is working with KDIC and CBK to untangle several regulatory and legal ambiguities that do not make it clear whether big depositors can have earlier access to their money, or whether they can offset their loans.
“These challenges have been borne out of the fact that the laws of placing banks in receivership never envisaged the receiver managing the firm to re-open them for business,” said Paul Russo, the Receiver manager appointed by KCB.
“In order to overcome these hurdles, the teams at Chase Bank (IR), KCB, KDIC and CBK have been working on a number of regulatory and legal innovations to rewrite policy and therefore Kenya’s financial history.”
KCB alongside Chase Bank (IR) has now tabled two legal frameworks to KDIC and CBK aimed at bringing more legal and regulatory clarity to allow the rollover of matured fixed deposits. It will also provide an option for fixing call deposits to a longer tenure and provide a basis for offering interest rates.
“As the bank progresses beyond its receivership status, there is undivided attention focused on guarding the priorities and interests of the customers and stakeholders. We are pursuing opportunities for our existing clients to earn limited interest rates on their matured deposit contracts while their funds are held in the accounts. We will be loyal to those who have stood by us as we strengthen our presence in the market as the Relationship Bank,” said Russo.
To reopen, Chase Bank received Sh3.5 billion on April 27, 2016 in a liquidity line from Central Bank. KCB said the bank has not sought additional liquidity support from CBK and remains self-funding, a strong indicator of the potential to get back into full-flight banking.