Please someone, save suffering depositors of Imperial Bank
What you need to know:
- It is a pity that even as the depositor continues to suffer, the Central Bank of Kenya and shareholders of the bank have chosen to expend time and resources to sterile court battles that are of no use to the depositor and only serve to fatten the wallets of lawyers and consultants.
- The most explosive revelations in the affidavits are copies of the returns of bank inspection reports containing contradictory information that suggests that individuals were colluding to deliberately fudge and misrepresent numbers and to conceal information on large non-performing loans.
- I keep wondering whether the management of fallen banks in this country will ever become sophisticated enough to pay depositors quickly and to avoid protracted court battles and lengthy liquidation proceedings.
Will somebody please hear the voice of the citizen who has not had access to his savings in the troubled Imperial Bank since October last year?
I say so because I still do not see a clear path to an end to the tribulations of the depositors of this bank and the suffering of bondholders.
It is a pity that even as the depositor continues to suffer, the Central Bank of Kenya and shareholders of the bank have chosen to expend time and resources to sterile court battles that are of no use to the depositor and only serve to fatten the wallets of lawyers and consultants.
We all know that a civil case lodged in our courts is the nearest thing to eternal life on earth. Seeking legal redress in this country is so time-consuming that it sometimes makes no sense.
How can these people pretend that these court battles are meant to serve the interests of the poor depositor who has had no access to his money since October last year? The truth of the matter is that as things stand, the fate of the ordinary depositor has been left to the precarious benevolence of high-profile lawyers chasing fame, glory, and big money.
The latest development in this game of endless litigation is a counter-claim lodged in the High Court on Friday by the shareholders of Imperial Bank against the Central Bank.
I must say that I have thoroughly enjoyed reading the documents, especially the emails and other correspondence annexed to the affidavit by the shareholders.
The court documents contain sensational stories about how officials of the Central Bank’s inspection department were involved in freelance rent-seeking, receiving soft loans from Imperial Bank, including school fees, securing employment for friends and relatives, and paid-for holidays. Going through the emails and correspondence, it is clear that the inspectors were deeply compromised.
In one example, an email from a member of the CBK inspection department to a senior manager of Imperial reads: ‘We agreed with Mzee that my children shall never lack school fees as long as his bank was in operation.”
Another one says: “Thank you for the beautiful package. Blessed is the one that gives and forgets.”
Yet we all know that Central Bank inspectors are required by law and regulation to keep a distance with the regulated institution.
The most explosive revelations in the affidavits are copies of the returns of bank inspection reports containing contradictory information that suggests that individuals were colluding to deliberately fudge and misrepresent numbers and to conceal information on large non-performing loans.
The veracity of the documents presented in the court proceedings notwithstanding, the revelations portend major risks to the reputation of the regulator because at stake is not only the integrity of bank inspection reports, but also the accuracy of banking sector numbers.
If the quality and integrity of the work of bank inspection is as compromised as portrayed in the court documents, then we could be sitting on a time bomb.
Clearly, the time has come for the Central Bank to change tack and come out with a better plan to allow depositors to get access to their money as quickly as possible.
Granted, the regulator did the right thing to pay most of the small depositors. But we often forget that customers have several relationships with their banks, including current accounts, loans, mortgages, safe deposit boxes, and working capital.
Which is why closing the doors of a bank is more than a hassle for most people and businesses. It can mean running out of working capital, late payments or in cases of mortgages, no access to important documents and securities.
I keep wondering whether the management of fallen banks in this country will ever become sophisticated enough to pay depositors quickly and to avoid protracted court battles and lengthy liquidation proceedings.
You just have to look at an annual report of the Kenya Deposit Protection Fund to appreciate how long it takes to liquidate a bank. For instance, the defunct Trust Bank, which recently put out a notice calling depositors to go for their money, has been under liquidation since 1998.
In modern jurisdictions with more efficient systems, depositors are not subjected to such prolonged suffering. The regulator steps in immediately to ensure that not only do the depositors receive their insured deposits, but also that the closure of a bank is as hassle-free as possible.
Still, the elephant in the room is banking inspection. The spotlight must be directed at the inefficiencies and corruption in this critical aspect of bank regulation.
