CBK announces emergency bailout fund for troubled financial institutions

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By Beth Nyaga

The Central Bank of Kenya will, starting today (Monday), avail a facility to any bank or micro finance institution facing liquidity issues that are not of their own making, CBK Governor Patrick Njoroge has said.

While acknowledging that last week’s closure of Chase Bank had triggered panic withdrawals, especially from small banks, Dr Njoroge said the bailout would help to inject stability in the sector.

CBK announced the emergency bailout fund for banks in a strong push to calm the market and restore confidence in the banking sector.

As the lender of last resort, the CBK will advance money to cash-starved institutions without a limit, which Dr Njoroge cited a powerful tool to calm the market.

Asked why the CBK did not have such a facility or did not use it to bail out Chase Bank, Dr Njoroge said Kenyan financial institutions “are in as state of flux and, as such, the need to improve the instruments in our toolkit”.

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“We have never had a problem in regard to hysteria in the financial market,” he said.

Chase Bank becomes the third bank to be put under receivership in less than a year.

In 2015 the regulator put Dubai Bank and Imperial Bank under receivership citing unfavourable conditions and massive irregularities.

On Sunday, President Uhuru Kenyatta warned that owners of collapsed banks would be forced to return depositors’ money, saying “those who run banks will not be allowed to steal from depositors”.

Speaking at St. Andrews Cathedral ACK Thika, President Uhuru said the move is aimed at protecting the welfare of Kenyans who have deposited their money in the banks.

He added the move is also aimed at streamlining the banking system in the country that he said is being used by a few to make profit at the expense of their customers.

The President has already asked Treasury Cabinet Secretary Henry Rotich to ensure that customers in the banks that crashed get their money.

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The President also supported CBK’s Governor’s crackdown on rogue banks, saying the financial sector must be strengthened to prevent it from crumbling.

However, he said the sector was not in a crisis but only needed a clean-up to cure it from non-compliant lenders.

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