Why reopening of Imperial Bank might be postponed

By: OTIATO GUGUYU

Growing tension between Imperial Bank shareholders and Central Bank of Kenya is threatening to delay the re-opening of the bank.

On October 27, Central Bank said it needed a month to hand over the bank to shareholders, a duration that ends in a week. But it has emerged that the talks are falling apart as shareholders set conditions to inject money into the bank.

The recovery plan required injection of new capital, conversion of large deposits to equity, recovery and collateralisation of fraudulent loans, and change of the board of directors and senior management.

Reports quote a CBK official involved in the revival saying at least Sh40 billion will be needed to cover loans and deposits offered outside the balance sheet.

Court files showed that top managers siphoned Sh34 billion by lending the money to associates and companies off the books.

Shareholders have expressed interest in putting in Sh10 billion, but have been dragging their feet on the issue.

They are also yet to agree on the formula of converting deposits to shares, and the parties of interests to be paid on deposits converted to shares.

“The CBK notes with concern the delay by shareholders to provide adequate assurances for implementation of this proposal, and urges a quick resolution of the matter,” the regulator said in a statement on November 14.

The Sunday Nation learnt that some shareholders want assurances that they will not be prosecuted if they put their money in the bank.

CBK Governor Patrick Njoroge is on record saying they will not be absolved even if they finance the recovery. But the regulator has been tight-lipped on a possible stalemate in the negotiations when contacted by the Sunday Nation.

“There is an ongoing forensic audit. We await its outcome before commenting on specifics,” said CBK Communications boss Samson Burgei in a text message.

Last week, the regulator said the shareholders had even attempted to force depositors to chip in to save the bank.

“The CBK is also aware of misleading letters sent to some depositors requesting their authorisation to convert their deposits to equity. These letters are fraudulent. All communications about the bank will be made only by CBK or the Kenya Deposit Insurance Corporation (KDIC),” read the CBK statement.

SOURCE: DAILY NATION