MY KENYAN BANK GOES INTO RECEIVERSHIP-WILL I SEE MY MONEY AGAIN

You read it right.

My Kenyan Bank went into receivership on Tuesday, 13^th October 2015.

I still feel sick about the prospect and ‘what’ this could actually mean. 

Because I was going to be here in Kenya long term, I had only decided a month ago to transfer the last of my savings from my bank in Australia and deposit it into my Kenyan account here.  I was always incurring Australian bank fees, withdrawal fees and spending way too much on my Aussie credit cards and thought that this would be a good solution to all that, which at the time, sounded like a good idea all round.  

How wrong I was.

Imperial Bank Limited, commonly known as Imperial Bank, is a commercial bank in Kenya, the largest economy in the East African Community. It is one of the 43 commercial banks licensed by the Central Bank of Kenya (CBK), the central bank and national banking regulator.  The bank is a medium-sized retail bank that caters to both individuals and corporate clients. As of December 2013, the bank's total asset base was valued at about US$498 million (KES:43 billion), with shareholders equity of approximately US$66.2 million (KES:5.719 billion).  At that time, Imperial Bank Limited was ranked the 19th largest Kenyan commercial bank, by assets, out of the 43 licensed banks in the country.  The bank was established in 1992 as a Finance and Securities Company and in 1996, the bank commenced commercial banking services, following the issuance of a banking license by the Central Bank of Kenya.  On paper, everything looked above board.

My relationship with my bank, Imperial Bank, had been a good one.  It is a mid-sized bank and they have been quite helpful when I have needed it.  My actual branch is in my area, easy to get too and they always knew my name when I walked in the door, smiles on their faces and I always left there with a smile on my own face.   I mean, I had some small issues, but who doesn’t when you are dealing with banks.

So this brings us to two weeks ago. 

I opened a term deposit with no problems, but a misunderstanding on the interest rate a government tax I was a little pissed.  Thinking that it was a little sneaky on Imperials part to forgo important details, I was going to move the money.  It was now about the principle of the thing, and if it was going to cost me a small amount, it was going to be worth it, as I’d be damned if they were going to keep my money now.  As of 4 days ago, I still hadn’t closed my fixed account with Imperial.  I didn’t have a lot of free time during the week; so on the week-end I did some more last minute rate shopping with 4 more banks.  It is a funny beast the fixed account here in Kenya.  It seems it is not a ‘done’ thing here.  The first bank told me I would earn 10 bucks (totally wrong), the second bank had to make 5 phone calls to get a rate, the third bank’s rate was laughable and then the last bank I went to on Saturday was going to get a rate for me (their treasury was closed) and he would call me back on Monday.  After hearing back from them I was then going to make a decision.  The last bank was the most switched on, they seemed to know what they were talking about and I had a good feeling when I left there that I may have found a new home for all of my savings.

Two days later my bank went into receivership, with my money still there. 

I still find it hard to believe that I was going to remove my money probably within the week, I only transferred my money 2 weeks ago and now we have no idea on what will happen to it ALL.  Every penny I own..... EVERYTHING.

I feel sick.

Not only did I have a term deposit with them, but my every day account was with them, Eric had a business account with them and also not to forget my visa bond as well.  Let’s just say that there is thousands of dollars at stake.  I am a loyal person, and that includes my banking practices.  When I hear people say ‘don’t put all your eggs in one basket’ makes me a little mad.  It makes sense, but where has good old loyalty gone these days?  Not that is really backs me up in this instance, and apparently ‘good old loyalty’ gets your money frozen for an undefined amount of time.    

So what is the story?

Why did a well known, what seemed to be a sturdy, reliable bank go into receivership? 

The bank posted Sh1 billion in half year profits up from Sh858 million in a similar period last year.  In the latest half-year results, the bank booked an after-tax profit of over a billion compared to Sh2.7 billion for the full year in 2014. Data from the CBK show that about 33,000 deposit accounts in the bank had less than Sh100,000 as at December 31, 2014, and 18,117 bank accounts with more than Sh100,000.  There are good stats there, nothing to worry about financially BUT there seems to have been some dodgy staff, doing dodgy things, something we have no power over, nothing we can do about it and THAT is what finds us in this mess.

Billionaire business mogul Alnashir Popat is the single largest shareholder in a list of Imperial Bank’s owners that also includes the ex-managing director, the late Abdulmalek Janmohamed, who passed on less than a month ago. Central Bank of Kenya  did not provide details of the supposed ‘unsafe and unsound business conditions’ that prompted the closure whose implications go beyond just customers to the investors who only weeks ago lent more than Sh2 billion to the lender. Mr. Popat has interests in tens of companies in Kenya, and has in the recent months been linked with a proposed Sh3 billion-worth budget hotel in the Westland’s suburbs, to be operated as a franchise of a global chain. Imperial Bank comes across as a surprise target for closure considering the significant size of its loan book, capital base and even profitability. 

The Central Bank of Kenya has placed Imperial Bank under receivership for a year for what the regulator termed as unsafe banking conditions.  CBK has appointed the Kenya Deposit Insurance Corporation to assume the management, control and conduct of the affairs and business of the institution and to exercise all the powers of the institution to the exclusion of its board of directors and advise CBK of an appropriate resolution strategy as soon as is practicable and not later than twelve months from date of appointment, the regulator said in a notice.  Devastated customers tried to withdraw funds from the bank through the mobile money transfer service received an error message, while branches were closed. Stopping withdrawals from the bank is usually a first step taken to avert a run on a bank whose implications for any lender can be tragic. The bank has 30 branches in Kenya, and five in Uganda, making it among the bigger lenders in the region. The Kenya Deposit Insurance Corporation – an arm of the Central Bank of Kenya, will assume management of the bank for twelve months.  KDIC is working closely with the board of directors of Imperial Bank Ltd for a resolution mechanism CBK said as it sought to calm the nerves of customers and the general public.

Banking fraud detectives were yesterday piecing together how senior management and staff at Imperial Bank eluded the regulators radar for years (apparently) to execute one of the biggest frauds in Kenya.  It has been implied that the banks staff colluded with top management to violate banking rules for profiteering motives.  Details have emerged on how the death of Imperial Bank former boss, Mr. Janmohamed, opened a can of worms that finally saw the Central Bank of Kenya place it under its management. Mr. Janmohamed, who had been CEO since the bank was formed in 1992, died last month under mysterious circumstances (a reported heart attack).  Barely a month after his death, the Central Bank of Kenya said the bank’s board of governors approached it, citing massive fraud in the institution.  The board of governors, after being notified of the irregularities, which became evident after the death of Mr. Janmohamed, brought in an international forensic team who confirmed the irregularities.  What has not been made clear is WHAT are these irregularities?  Exactly what has happened?  Even now, 5 days later, we are none the wiser on what the hell has certain staff done at Imperial Bank, to shut it down? 

As soon as I had found out about the closure, I went straight to my branch at Village Market.  Needless to say it was closed and the ATM was out of order.  It was at this time that I felt my stomach drop.  I then proceeded to another bank’s ATM to try my luck and I got an error message and was told to contact my bank.  There was a lady standing behind me, also with an Imperial card in hand, asking if mine worked.  When I shook my head, she didn’t even bother to use her card.  She told me she was able to access money from her account that morning, but she had tried all the ATM’s at Village with no success.  My last ditch effort was to try and transfer money via my mobile app to my MPesa account, but this also came up with an error and I knew that I was not going to be able to access my accounts.  A few days later we tried to buy something online, you know just in case they forgot to stop that function (yeah right) but no luck there either.  It really is such a useless, frustrating situation. 

There are so many angry customers which is totally understandable.  Think of the people that had more money than me, think of the ma and pops account, where they also have their own life savings, whether it is 10 bucks or a million bucks.  Think of the Imperial staff.  They are all probably wondering if they will still have jobs, wondering if they will get paid, and if a miracle happens, just imagine the issues they will have to deal with once, if ever, the branches open again.  There will be a lot of disgruntled customers.  They are on the front line and they are going to have a lot to deal with allot, when it really had nothing to do with them either.  It really is a BIG BIG BIG mess.  The only people who are gaining something out of this terrible situation, I feel, are the people who OWE the bank money.  Eventually they will have to pay up to some-one, but at the moment I would be thinking they are the only ones that have a smile on their faces. 

Officials said a forensic audit being undertaken by the Kenya Deposit Insurance Corporation will determine the elements that caused the problems at the bank and the appropriate course of action.  The regulators will be faced with three options:

• The first is capital injection, resurrecting and finally re-opening of the bank
• The second could see the bank sold in part or wholly.
• The third option is liquidation.

It is of course too early to call what option will be the best.  Especially as the public have not been told what the issue was.  It is only in the event of liquidation that people can be paid insured deposits (100,000KES – 1200AUD) and any balances after this, once assets are sold and debts collected through liquidation, can you try and get the remainder of your money.  Nothing can be paid to anyone during receivership and the depositors and creditors need to wait for the Kenya Deposit Insurance Corporation to work out the best resolution options.  Typically, depositors with less than Sh100,000 in their bank accounts are insured by the KDIC – the receiver manager.  Such customers are usually the first to be compensated should their bank be found to be insolvent – as is the case with Dubai Bank, who went into liquidation 3 weeks ago and other lenders that have collapsed in the past. Focus about the closure of Imperial Bank now shifts to the CBK and the CMA, the two regulators who only six weeks ago gave the approvals to borrow the Sh2 billion through the corporate bond issue.

It is also unusual that there has not been any formal statement from the bank themselves to its clients.  The bank is owned by a VERY wealthy Indian Family.  It is an Indian bank, and there are A LOT of wealthy Indians in Kenya, who have a hell of a lot more money than me vested in the bank.  We are talking MILLIONAIRES.  I think I am frustrated not being able to get to my funds, imagine if you had 70 million in there?  There are businesses that can’t access money to pay for wages and utilities…… There is such a massive knock on effect and the thought is just scary and very mind boggling.  This was a stable bank.  It had a great name, a great reputation, its figures were impressive, it makes money each year and NO_ONE saw this coming – AT ALL.  Not only is a blow to its customers, but also to the banking sector.  I think that Imperial found a loop hole in trading somewhere, and it has not been made public, because if Imperial, a well known bank is doing something shady, then I can guarantee that there are less reputable banks doing something similar.  It will be interesting to see what they have done wrong.

I have many questions. 

• Did the board members think this is the way it would pan out when they decided to come forward?
• Did they access their money before the call?
• Are they still in the country?
• Is Mr. Janmohamed just a scape goat now that he has passed away?
• What about Mr. Janmohamed’s family.  Did they know? 
• If he is innocent-how will they feel with his name being dragged around in the media as a bad guy?
• Will I ever see my money again?
• What were the issues?  Why haven’t they told us?
• Will I stay with the bank if it re-opens?  It could be the safest bank after the audit right?!!
• Where is the biggest shareholder Alnashir Popat?  He’s probably on a jet plane out of Kenya……

To think it was the Imperial Bank board members that made it public and reported the irregularities to the authorities, we must see this as good sign?  It is funny, not ha ha funny, but strange funny, that there are so many stories, theories and gossip floating around that it is hard to work out what to believe.  I have a friend who is well connected and says there is nothing to worry about, then I have Eric’s brother, who works for another Kenyan bank, said that we need to be realistic and that we need to be prepared that we will possibly lose everything.  It’s hard to know who or what to believe.  At the end of the day, we just need to stay calm, and time will tell what will actually happen.  There is nothing we can do about it.

Either way it’s pretty crappy, being an understatement.

My Nan deposited some money for me this week and I will get paid from my job at the end of the month, so all is not completely lost.  I will have money for food, a roof over my head and a job to go to.  We just don’t have the nest egg that I am used to having in case of emergencies, and this is something that I will just have to get used to.  In the meantime, I need to open another bank account here and the thought of that terrifies me actually.  There are 44 banks to choose from, so I will do a little homework and just look at the international ‘big boys’ and just suck up the account service fees that these bigger, international banks charge.  I need an account here; it is just a matter of working out where to go. 

Five days on, and we are finally getting used to the fact that this will all take time, and I have stopped reading about it in the newspaper and social media, full time, as it just makes me depressed all over again.  Everyone has an opinion, the good the bad and the ugly, but as I said to Eric there are probably only a handful of people who know the real story, the extent of what has happened, and we need to take everything else we read with a grain of salt, until Imperial or the Central Bank of Kenya make an official statement.  Whenever that may be…….

 

I can’t think of the what if’s. 

• What if I had of closed that account last week when I said I was going to? 
• What if I had of paid the bills the day before they closed, at least my money would have been used.  What if I hadn’t of done a transfer to Eric the day before, I would be looking at a bigger loss………. 
• What if the last bank man had of rung me back with a rate, would I have done anything the day before?
• What if I had of just left my money in Australia?

I need to keep my eye on the prize, life itself.  I have my health, I have love, I just maybe missing wealth, but what is life if it isn’t a little screwed up at times.  For once, I have finally lost money at no fault of my own, no stupidity, just VERY VERY unlucky.  Funny not funny.  I am a person who sees the world through rose coloured glasses, the glass is always half full, and this is my way of trying to keep a positive, upbeat vibe going.  As my best friend pointed out, I always seem to fall on my feet, and there is no reason that I won’t again.