Imperial Bank depositors face grim prospects in pursuit of Sh50b

Headquarters of the Imperial Bank, Westlands. [Beverlyne Musili, Standard]

Deposits in the deep pockets of the Imperial Bank, now in liquidation, are scouring history in search of hope. But there are few.

Previous financial institutions that entered the liquidation phase stayed there for years – the recent example being Fortune Finance Ltd, which took 18 years to liquidate. Others have been in the process for almost 30 years.

Imperial Bank had been in receivership for over six years and has now moved into the liquidation phase, where loans must be recovered and physical assets sold to recover up to 49.59 billion shillings for depositors.

But depositors getting their money back won’t be as easy as it seems on the morning of October 13, 2015, when the Central Bank of Kenya (CBK) blocked the lender for “dangerous and precarious business conditions”.

Fortune Finance collapsed on September 14, 2000 with depositors’ money of 320 million shillings. He had 287 million shillings left when the liquidation began this month, but only 188.81 million shillings has been recovered in 18 years.

The liquidation of Inter-Africa Credit Finance and Central Finance took 20 years each, while Nairobi Finance and Heritage Bank took 18 years each.

Other liquidations that have taken years include Diners Finance and Trade Finance which lasted for 15 years and Allied Credit and International Finance for 14 years.

The eight lenders went into liquidation with combined unprotected deposits of 1.72 billion shillings. After these many years, Sh537.09 million or 31 percent has been recovered. This means that 1.18 billion shillings has been lost.

17 other banks are in liquidation. Excluding Chase Bank, the other 16 began liquidation with uninsured combined deposits of 20 billion shillings.

At the end of June 2018, the KDIC had collected and paid 9.47 billion shillings or 47.4% of the money of these banks, which have been in liquidation for six years (Dubai Bank) to 28 years (Postbank Credit, Trade Bank and Middle Africa Finance).

The recovery process has been slowed down by poor documentation from the start, rural titles that are hard to sell, irregular and undocumented insider borrowing, and court cases that take too long to determine.

Such grim statistics point to a long and bumpy road for Imperial Bank depositors. Likewise with clients of Chase Bank where liquidation began in April 2021.

Many Imperial depositors may not have known each other for the bank’s nearly 20 years of existence. But their tribulations have united them in the Imperial Bank Depositors Lobby Group, a forum they run on Facebook and Twitter to share their frustrations with actions taken and not taken.

“End of the road?” was the question the group administrator asked members immediately CBK announced the liquidation process last Thursday.

“We have been played. Apart from a few thousand (shillings) we will not receive anything. They buried us all conveniently, ”said lobby member Murtaza Dalal.

Other members of the group want the CBK to make public the forensic report indicating the people who participated in the looting of the lender.

Liquidation is a process that Kenya Deposit Insurance Corporation (KDIC) Managing Director Mohamud Mohamud calls the “last mile” to liquidation.

But that last mile isn’t a sprint, it’s several marathons – at least according to the story. Yet this is the only way to build funds to distribute to depositors and creditors.

“It’s about trying to find out who has borrowed what and going after them. If they are unable (to pay), we realize security, ”Mohamud told the Sunday Standard in a previous interview.

“It’s a pretty long process and sometimes it comes up against legal action.”

Imperial Bank, known for a prominent purple crown sitting proudly on the logo like that of a monarch, crashed in October 2015 with 79.1 billion shillings belonging to 49,939 depositors.

Desperate customers, who were trying to save their fortune by withdrawing funds from the bank via mobile money transfer, received an error message. They watched with anguish and pain as the branches closed.

CBK data shows that depositors have so far recovered 37.3 percent, or 29.5 billion shillings, meaning that 49.59 billion shillings are still stranded there.

While around 92 percent of depositors have so far recovered all of their money, this is a case of hope for 4,239 depositors who will now be dependent on the liquidation process.

The unpaid amount is equivalent to an average of Sh11.7 million per customer; some have more, some less but all over Sh100,000.

The end of the liquidation is followed by a liquidation process, which is a step that KDIC takes once it is satisfied that the right assets have been depleted and that the uncollected dividends are unlikely to offer value to the investors. creditors.

KDIC issues a liquidation order when the cost of liquidation begins to show signs of exceeding the value of the remaining assets.

Liquidation is a painful process, according to KDIC, which is now keen to resolve banks while they are still open rather than when they are closed.

Once a bank goes into liquidation, depositors are paid up to Sh500,000, the maximum fully insured by KDIC. The rest depends on what is achieved on the sale of assets.

KDIC will wait for the official publication of the Imperial Bank liquidation before starting the process. This is a small problem for applicants compared to what to expect next.

Whether liquidation takes a month or more than 28 years, as is the case with Postbank Credit, depositors may never want to have anything to do with a purple crown in their lifetime.

Abdulamek Janmohamed, the main shareholder of the bank he founded and served as CEO, may have passed away six years ago, but the books on how not to run a bank are sure to be sure to follow. a chapter about it.

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